Obama defends Fed decision to print more dollars in face of growing criticism

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      Jon Ward

      Jon Ward covers the White House and national politics for The Daily Caller. He covered the last two years of George W. Bush's presidency and the first year of Barack Obama's presidency for The Washington Times. Prior to moving to national politics, Jon worked for the Times' city desk and bureaus in Virginia and Maryland, covering local news and politics, including the D.C. sniper shootings and subsequent trial, before moving to state politics in Maryland. He and his wife have two children and live on Capitol Hill. || <a href="mailto:jw@dailycaller.com">Email Jon</a>

President Obama on Monday defended the U.S. Federal Reserve’s recent move to buy $600 billion more in U.S. Treasuries, which has been criticized by top officials in foreign governments as a move to devalue the U.S. dollar.

“We’ve just gone through an extraordinary economic trauma, which has resulted in some extraordinary measures,” Obama said, speaking to reporters in New Delhi at a press conference with Indian Prime Minister Manhoman Singh.

“And the worst thing that could happen to the world economy, not ours — not just ours, but the entire world’s economy — is if we end up being stuck with no growth or very limited growth,” Obama said. “And I think that’s the Fed’s concern, and that’s my concern as well.”

The president was responding to a question about criticism from German Finance Minister Wolfgang Schäuble, who called the Fed’s move “currency slight of hand.”

“It doesn’t add up when the Americans accuse the Chinese of currency manipulation and then, with the help of their central bank’s printing presses, artificially lower the value of the dollar,” Schäuble said in an interview with Der Spiegel that appeared over the weekend.

And on Monday, the Chinese government added their voice to the growing chorus of criticism.

“As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets,” said Chinese Finance Vice Minister Zhu Guangyao, according to Reuters.

Russia, Brazil and South Africa have all also condemned the Fed’s decision.

In addition, a top official under Federal Reserve Chairman Ben Bernanke, board of governors member Kevin Warsh, penned an op-ed Monday in the Wall Street Journal that was both a sign of major doubts about the Fed’s move and a significant criticism of Obama’s economic policies.

“Fiscal authorities should resist the temptation to increase government expenditures continually in order to compensate for shortfalls of private consumption and investment,” Warsh wrote. “The Federal Reserve is not a repair shop for broken fiscal, trade or regulatory policies.”

Warsh said that he considers the decision to buy $600 billion in U.S. Treasuries between now and mid-2011 — purchasing them with freshly minted U.S. dollars — “subject to regular review.”

“If the recent weakness in the dollar, run-up in commodity prices, and other forward-looking indicators are sustained and passed along into final prices, the Fed’s price stability objective might no longer be a compelling policy rationale,” Warsh wrote. “In such a case — even with the unemployment rate still high — we would have cause to consider the path of policy. This is truer still if inflation expectations increase materially.”

Schäuble has promised to make the Fed’s policy — known as “quantitative easing,” or QE2 since this is the second time the Fed has taken this action — a major point of contention at this week’s Group of 20 summit in Seoul.

Daniel M. Price, who served as President George W. Bush’s top adviser on international economic affairs, said some of the biggest concerns about QE2 come from “emerging markets who fear consequent distortions in currency and capital markets.”

“They have reacted by imposing ad hoc capital controls which can further distort investment flows and have an unfortunate history of outlasting the reason for their imposition,” Price told TheDC.

“Likewise, this move by the Fed has made it more difficult for the administration to galvanize countries to push China on currency appreciation when many view the Fed’s policy action as itself a contributor to currency misalignments and imbalances,” Price said.

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  • snappercat

    Let’s see; Obama told us that the stimulus would keep unemployment under 8%, that the healthcare bill would restrain price increases, that he had “saved and created” millions of jobs and that last summer was Recovery Summer. So, of course, when Obama defends the Fed’s decision to print money, the prices of oil and gold soar, and the poor, the middle class and maybe even the wealthy end up with reduced buying power.

  • oeno

    I can only think of “The Simpsons” episode, “Oh no. The Germans.” What are they going to do? Not carry the debt from insolvent nations they let in the EU despite their weaknesses years ago?

    The dollar actually gained against the Euro for precisely this reason.

  • libertyatstake

    Honey, where do we keep the wheelbarrow?

    “Because the Only Good Progressive is a Failed Progressive”

  • Blackheart_Six

    Screw it. Let’s extend the tax cuts for everyone. Let’s give all the people on unemployment another extension. Let’s give all the social security recipients a $250 check. What else? Lets start another war some where. Let’s bail out some more businesses. And I am sure some country in the world could use our money, and then talk big shit about us.

    We’re America damn it, we can do everything and anything we want! No Spending Limit Charge Card! Cha’ Ching!