Us Quantitative Easing Exacerbate Global Inflationary Pressure

December 27th, China

Zhang Yongjun said, first of all, the United States

Secondly, the increase in US dollar supply and the depreciation of the US dollar will result in an increase in global hot money. Hot money flows to the new economy and other developed countries. Some of them will be mixed into the foreign exchange reserves of the state, which will cause the central bank to increase the supply of local currency through the monetary leverage channel, which will also cause inflationary pressures in other countries to increase.

In November 3rd, the Federal Open Market Committee (FOMC) formally announced the launch of the second round of the relaxation of the basic monetary policy (QE2). It plans to purchase a total of US $600 billion of treasury bonds in order to promote a stronger recovery in the US economy.

The US Federal Reserve issued a statement after its regular policy meeting in December 14th, noting that the Fed did not intend to change its current loose monetary policy. It would insist on a $600 billion bond buying program and keep short-term interest rates at near zero levels.

The Federal Reserve's $600 billion bond buying program has caused huge controversy in the United States both internally and internationally. Critics believe that the second round of quantitative easing will trigger inflation and weaken the US dollar further.

The holders of US dollar assets will suffer losses, and 2/3 of the current foreign exchange reserves are held by emerging economies and oil exporters, with the largest amount of damage.

In addition, the US quantitative easing monetary policy can not fully achieve the expected effect of the Fed's claim, and will have a negative impact on the US's monetary position.

Zhang Yongjun also said that because of the depreciation of the US dollar, this would weaken the international status of the US dollar.

In the late 80s of last century, when the US took a big devaluation, the proportion of the US in the international reserve currency dropped from 70% to about 50%.

At present, the US dollar accounts for about 62% of the foreign exchange reserves. The implementation of such a policy in the US does not exclude the sharp decline in the share of the US dollar in foreign exchange reserves.