Joseph Stiglitz: America's QE2 poses 'considerable' risks

[girl gone mad]

Joseph Stiglitz: America's QE2 poses 'considerable' risks
Nobel Prize-winning economist Joseph Stiglitz has said the US government's second bout of quantitative easing poses 'considerable' risks to global economies.
http://www.telegraph.co.uk/finance/economics/8195572/Joseph-Stiglitz-Americas-QE2-poses-considerable-risks.html

“All this liquidity that they’re creating is not going back to grow the American economy and is going to Asia and other emerging markets where it’s not wanted,” Mr Stiglitz said. “Most of the countries around the world have begun to react. They put in capital controls, exchange rate interventions, taxes on these capital flows - a variety of interventions.”

The Federal Reserve is set to buy an additional $600bn of Treasuries - dubbed QE2 - until June 2011 in an attempt to boost economic growth, according to the central bank's chairman Ben Bernanke.

However, Mr Stiglitz maintains that banks in America will invest money provided under the Fed’s program in Asian and other emerging markets, which have recovered faster from the recession.

An increased rate of capital into such markets could cause currencies to appreciate and create asset bubbles, he warned.

Net private capital flows to emerging market economies will rise 42pc to $825bn in 2010 compared with $581bn in 2009, according to trade group the Institute of International Finance.

“Unintentionally, QE2 is leading to a fragmentation of global financial markets because each country takes actions to protect itself,” Mr Stiglitz said. “As more and more do that, it puts more and more pressure on those that don’t, and they will eventually be forced to take some form of action.”

http://www.telegraph.co.uk/finance/economics/8195572/Joseph-Stiglitz-Americas-QE2-poses-considerable-risks.html">more...

[no_hypocrisy]

1. It's not so much the Fed as much as the system that will prevent recovery.

However, Mr Stiglitz maintains that banks in America will invest money provided under the Fed’s program in Asian and other emerging markets, which have recovered faster from the recession.

I wish there were a system where the businesses could apply for the money like a grant and bypass the banks getting the money to begin with. The Fed money is understood to be used to stimulate the economy, not the banks' share prices.

[Kat45]

2. Is there any way to stipulate that companies must invest the money in this country?

Probably not, I don't know. I would think they at least could have put stipulations on the bailout money given to them by the government, from our tax dollars.

[roamer65]

3. One really has to ask why they are debt monetizing Treasury paper.

Answer: Beacuse there would be no buyers for it on the open markets.

[dixiegrrrrl]

4. You are 100% correct.

It has been nothing more than a fiat economy of made up binary bits, for years.

Banks "assets"? ="Notional" ( imaginary).

Jobs and unemployment figures reported?....nowhere close to reality.

Like Alice in Wonderland...."a word means whatever I want it to mean".