Recently, the United States to re-start “quantitative easing” policy, increase the currency, resulting in global financial markets awash with liquidity, caused widespread concern around the world, in the just-concluded summit in Seoul on the G20 is also controversial.

From the specific data, the United States the total amount of broad money M2 is about more than 83,400 billion dollars, in November 2010 for 600 billion U.S. dollars increased QE of about 7.2%, totaling less than 9 trillion. Since the outbreak of the financial crisis, the dollar significantly increased the release rate, while deliberately maintaining a low U.S. dollar interest rates, the dollar in the United States pattern of excess liquidity rapidly transmitted to the international market, according to rough estimates, less than 9 trillion in total broad money in the United States roughly 4 trillion U.S. dollars in circulation within.

From the situation in China, China’s broad money in the first three quarters of 2010 increased by 19%, the actual amount of additional money than the United States by the introduction of quantitative easing 6,000 billion U.S. dollars. From the stock, China by the end of September 2010 at 69 trillion yuan of total M2, converted into U.S. dollars or more over 10 trillion U.S. dollars, and RMB is not an international currency, in addition to a very limited overseas circulation, the vast majority of the RMB circulation in the territory. In aggregate, although the total amount of China’s GDP is only about a quarter of the United States, but China’s broad money supply has surpassed the U.S. as the world’s first.

In response to the financial crisis, the United States to take a lot of currency strategies in the U.S. dollar as the international currency conditions, this is bound to loose liquidity transfer to the international markets, and macroeconomic policy in emerging market countries impact. At present, many developing countries are facing similar challenges, if such international mobility within the foreign exchange market intervention does not spread to the currency’s sharp appreciation of the potential and impact of its exports, if the intervention can also lead to hedging domestic inflationary pressures and asset bubbles.

From the global economic perspective, the United States, Europe, Japan G3 level of the country’s economic growth over the next 3-5 years is still difficult to recover to pre-crisis levels. Prior to this, a series of supporting policies may be difficult to quit; financial system remains fragile, and the private balance sheet is yet to be repaired, by a sustained recovery of private consumption is unlikely. On the contrary, to avoid trapped in a “debt – deflation trap” quantitative easing monetary policy is necessarily one of the options; the financial position of the United States and other countries in the next two years, may continue to deteriorate, and the slow recovery of the economy and restricted the Financial fixed space.

In this context, the nominal interest rate close to zero, negative real interest rates, the traditional transmission channels of monetary policy to function effectively, therefore, represented the United States, central banks in developed countries have to rely on their own to change the structure of assets and liabilities ( through purchase of government bonds to expand its balance sheet) to affect financial market expectations. However, in order to maintain global confidence in the dollar, the U.S. dollar should be issued in the general area who are more restrained tone.

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Category: Business Management
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