Bernanke Responds to Critics

Published by: Mike Goldman on 19th Nov 2010 | View all blogs by Mike Goldman
Ben Bernanke.jpg

Bernanke Responds to Critics

Federal Reserve Chairman Ben Bernanke delivered a speech in Frankfurt, Germany on Friday defending his quantitative easing program and criticizing China's weak currency policy.

Bernanke said that the best way to underpin the dollar and support a global economic recovery is through policies that lead to a resumption of robust growth in a context of price stability in the United States.”  He went on to say that countries undervaluing their currencies could hinder growth in markets around the world and eventually lead to financial instability at home.

Bernanke received extensive criticism from officials in nations like Brazil and China for the Fed's recent decision to purchase $600 billion in Treasury bonds.  The critics claim that the decision will weaken the dollar and contribute to cash flows in emerging markets.  The decision also has critics here at home, where some, mainly Republican members of Congress, say the policy risks fueling inflation and asset bubbles.

As the Fed chairman delivered the speech, China's central bank announced it will raise the reserve ratio requirements for the nation's banks by 50 basis points starting November 29th.  The dollar fell to $1.3671 per euro as of 9:30 AM ET from $1.3643 at the close of Thursday's trading session.  The Standard & Poor's 500, meanwhile, fell 0.2 percent in early trading to 1,194.17.

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