US Federal Reserve Chairman Ben Bernanke on Monday rejected worries that the world’s troubled large economies were competitively cutting their currency values and hurting smaller, healthier ones in the process.
Bernanke told an audience at the London School of Economics that, although the exchange rates of some major economies have fallen, the policies are aimed at boosting growth and “confer net benefits on the world economy as a whole.”
Moreover, he said, because the main economies are all pumping up their money supplies — effectively pushing down the value of their currencies — the net change between their currencies is not very significant.
Do the strongly stimulative economic policies of countries like the US, Britain, Japan and elsewhere “constitute competitive devaluations?” Bernanke asked rhetorically. “To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries.”
Bernanke’s Fed has been the target of charges that ultra-low US interest rates and large “quantitative easing” programs, which pump cheap money into the financial system, are aimed at driving the US dollar down in order to boost exports.
Japan, also with rates at the zero level and a huge stimulus program, has also been blamed.
The criticisms come mainly from countries with stronger economies, which say they are both being swamped by inflows of money seeking higher returns and are finding it more difficult to export because their currencies are more expensive.