The Chinese, among others, aren't happy with the Fed's new quantitative easing policy. Today in Frankfurt, Ben Bernanke answered those criticisms and made a few of his own. Attacking "currency undervaluation," with a clear nod toward China, he called for a "global rebalancing of trade and current accounts." He also said it really was necessary to rescue the American economy--and that, just as the Fed has stepped up to the plate, Congress should too.
Fed chairmen don't usually do this. As with other speeches, bloggers and commentators are all over the map in terms of what parts of the speech they're focusing on. But here's a rough rundown of reaction to Bernanke's notable foray into a political fight.
- That Was Different "At least in tone, if not necessarily entirely in substance," remarks The New York Times' Catherine Rampell, "this seemed to be a departure from what we’ve historically heard from Fed chairmen, usually at pains to avoid the political fray."
- Well, Good for Him "It's not great that Bernanke has to do this," says liberal Kevin Drum at Mother Jones. "But it's great that he's putting his cards on the table. I'm truly curious about just how far Republicans are willing to go to overtly take the side of China against monetary policy designed to help the American economy."
- Yoohoo, Congress, He's Talking to You The Atlantic's Derek Thompson offers a rough translation for American policymakers: "The Federal Reserve has stood up and taken licks for coming to the defense of the US economy. Now, as Bernanke said in Europe, it is Congress's turn. Who's feeling brave, out there?"
- Gave China a Reason to Cooperate "His argument is hard to refute," muses Douglas McIntyre at 24/7 Wall St. "If the West and Japan move back into recession, then China will lose the momentum it needs to grow." In other words, it's in China's interest to calm down over quantitative easing and make sure the American economy gets back on its feet.
- 'Humanized the Intent of the Fed' Peter Boockvar at The Big Picture notices that Bernanke defended American policy in part by saying that "'on its current economic trajectory, the US runs the risk of millions of workers unemployed or underemployed for many years…As a society, we should find that outcome unacceptable.'" On the other hand, Boockvar points out, "we can all agree on that," but not necessarily the method of curing the problem: we could effect large-scale interventions, or we could "have faith in the wonders of capitalism and its ability to regenerate if the economic cycle is left alone."
- How About We Quit Trying to Change Chinese Policy? Instead, how about we change our own, suggests Dave Schuler at Outside the Beltway, who points out that the Chinese just don't care that much about American "wants and needs."
We were not forced to extend most favored nation trading status to China, expand trade with China, or sell U. S. Treasury notes to China. We were also not forced to allow commercial banks to get into the investment bank business, loosen lending standards, or make risky bets on perpetually rising housing prices.
Those were policies, conscious choices, we made them, we had good reasons for making them, but they were not the only possible choices.
They are not laws of nature and treating them as such while treating Chinese policies as malleable to suit our needs is mere petulance.