To reduce unemployment and avoid deflation, the Fed mad at Caesar $ 600,000,000,000. The global market “pull tendons move bones” policy and the global economic landscape will have profound effects: global capital will be more “like a tiger” to gather in emerging markets and emerging market countries are not safe sitting on “liquidity” volcano.

Wary of capital inflows

As the world’s largest bond fund at Pacific Investment Management Company (PIMCO) Mohamed El-Erian, chief executive said on Thursday that: “If there is no substantial structural reforms, part of the funds injected by the Fed will be out of the United States, and creating new a tide of capital outflow. ”

El-Erian believes that such an outflow of capital will also pose a threat to other countries. “Brazil, China and other emerging economies already showing some signs of overheating, the euro zone and Japan may be forced to suffer the appreciation of the currency drag.”

With Asia’s economic growth rate than other parts of the world, most Asian currencies against the dollar this year, have seen substantial appreciation of the quantitative easing in the Fed announced that the second resolution, most Asian currencies against the U.S. dollar is more a continuation of this rally.

To hedge in advance the impact of the Fed QE2, the Federal Reserve on Wednesday before the FOMC meeting, China, Australia, India have to raise interest rates.

After the announcement on Thursday, emerging economies have expressed dissatisfaction with the move of the Fed, has or is about to take further preventive measures. This makes the G20 summit next week to reach substantive agreement on the exchange rate of hope even more remote.

South Korea on Thursday said it has been planning the Ministry of Finance to convey the information to the market, will be “actively” considering to impose controls on capital flows.

Philippine central bank governor Tetangco said: “As the U.S. market, the yield will remain low in the more time and capital to emerging markets including the Philippines, the transfer is likely to continue. Thus the Philippine central bank will remain vigilant of the situation development of monitoring, and real growth on the U.S. Federal Reserve policy, as well as to measure the global inflation outlook. ”

In Latin America there is a similar voice. Brazil’s central bank governor Meireleis said: “The money will go into other growing countries, including Brazil, lead us to absorb the excess liquidity of dollars. We have introduced to increase the IOF tax (taxation of overseas funds to buy bonds) and Other robust measures intended to prevent the credit bubble in the economy generate. ”

In addition to dissatisfaction with the self-protection, some Asian countries should join hands to resist actively the proposed U.S. dollar risks in emerging markets.

Thai Finance Minister Korn Chatikavanij said on Thursday the second round of the U.S. policy of quantitative easing, the Asian countries may take joint measures to prevent excessive speculation in local currency. Korn Chatikavanij that the Bank of Thailand is close talks with other Asian central banks, if necessary, the central bank to take joint measures to prevent excessive speculation.

Malaysia’s central bank governor Zeti Akhtar Aziz said: “Comparison of the region’s awareness of the various central banks, and the monitoring of capital inflows in the region have often in close contact. We have a strong regulatory system, and to share in the management of capital inflows experience. the region in the management of this challenge the central bank has plenty of policy tools, and willing to collective action when necessary to ensure the stability of the entire region. ”

The Fed will not achieve the quantitative easing policy is not only stimulate the economy, but will accelerate the outflow of U.S. funds. China should unite with other countries to jointly curb the excessive depreciation of the dollar to ease pressure on RMB appreciation.

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