Large spillover effects of quantitative easing policy, excess liquidity will lead to new contradictions and conflicts, including the competitive exchange rate intervention, the global redistribution of wealth, the emerging market economies increased pressure regulation, macroeconomic policy and global financial conflict market volatility led to the coordination of the global economy has become more difficult.

Frequency of competitive exchange rate intervention

Developed countries, monetary expansion and currency depreciation, leading to excess global liquidity, capital flows to emerging market economies, emerging market economies have a huge impact on the currency, these countries fluctuations in exchange rates. U.S. dollar is the main reserve currency, the Fed led to a weaker dollar quantitative easing, the passive appreciation of the currencies of other countries, while excess liquidity flows to emerging market economies, leading to increased pressure on these countries currencies of these countries in order to prevent a substantial appreciation of the currency intervention foreign exchange market intervention in the foreign exchange market showed a competitive situation. U.S. to launch a new round of quantitative easing, the dollar devaluation and liquidity surplus will increase the instability of the global foreign exchange market, foreign exchange intervention in emerging market economies and capital controls may increase the intensity. Such as South Korea on Nov. 4 Planning and the Ministry of Finance announced that it will “actively” consider taking measures to control capital inflows; the same day, won the Bank of Korea to sell to the market to prevent the won-dollar exchange rate rise further. In response to the appreciation of these countries were forced to intervene in the foreign exchange market, control capital flows, but once the profit return of speculative capital will lead these countries to bear greater losses.

Major reshuffle is inevitable global wealth

Quantitative easing policy has resulted in a weaker dollar, dollar-denominated international commodity gold, crude oil prices have increased substantially and distribution of wealth to these countries. Such as the recent launch of a new round in the United States announced the policy of quantitative easing, the price of gold exceeded $ 1390, crude oil prices topped 87 dollars. In addition, the currency appreciation, gold, stocks and international commodity prices, some speculative funds can be profited from fluctuations in asset prices, the developed countries the main hedge fund financial strength, rich experience in international financial markets, speculation that the momentum, market manipulation, windfall profits, further amplify the financial asset price volatility, speculative funds in the global financial market turmoil to make a profit, resulting in the redistribution of global wealth. At the same time developed into a lot of liquidity, market inflation expectations rise, commodity prices, increased imports of these commodities price pressures countries, increased risk of imported inflation. Quantitative easing policy has resulted in depreciation of the dollar, the price level rose, the main foreign exchange reserves in emerging market economies face the risk of shrinking, while dilution of U.S. foreign debt, leading to the redistribution of global wealth.

Regulation of emerging market economies face the dilemma

At present, the developed countries and emerging market economies, the pace of recovery is inconsistent, developed and developing countries is difficult to coordinate macroeconomic policies of major developed countries to over-loose monetary policy, and emerging market economies to guard against asset price bubbles and inflation risks , tightening monetary policy, monetary policy is inconsistent trend. Regulation of emerging market economies face the dilemma, it is necessary to control asset prices and inflation, but also to prevent hot money inflows, often trade-off, both inside and outside is difficult. Therefore, the quantitative easing policy exacerbates the imbalance in emerging market economies, emerging market economies led to the exchange rate, interest rate regulation conflicts, internal balance and external balance of the conflict, emerging market economies to assume more regulatory pressure to drag the emerging market countries economic recovery.

More difficult global economic coordination

Although the Fed is not a world central bank, but the U.S. dollar is the major international currencies, the total U.S. economy, first in the world, the United States is the world’s major markets, the Fed’s monetary policy through capital, trade and other channels to affect the global economy, the U.S. policy of quantitative easing greater impact. Investment in the liquidity trap and the trap in the presence of the Federal Reserve monetary policy had little effect, but too much liquidity the Fed raises monetary policy developed and developing countries of conflict, turmoil in global financial markets intensified. Quantitative easing policy has resulted in the U.S. dollar, exacerbating currency and trade conflicts, war and trade war can easily lead to currency. Developed and emerging market economies in different stages of economic recovery, increasingly integrated global economy, capital flows, speed up, the United States to increase the spillover effects of macroeconomic policies, exchange rates, interest rate and trade conflicts are intertwined, fragmented, slow economic recovery , making the coordination of the global economy becomes more difficult.

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