German Finance Minister calls Fed "Clueless"; G20 Showdown with China; Why Geithner's "Non-Plan" is Nothing but Hot Air

Outside the blogosphere and into realm of high ranking government officials, it is rare to hear words like "clueless" to describe the Fed. That such talk is now occurring shows just how upset the rest of the world is at Bernanke's policies.

Reuters reports US Policy 'Clueless': German Finance Minister.

Europe needs to strengthen economic governance and agree on a permanent crisis resolution mechanism, all the more so given current U.S. economic weakness, German Finance Minister Wolfgang Schaeuble said on Friday.

France and Germany should maintain their leadership role in Europe, Schaeuble said, especially in order to harmonise its economic policy and bolster stability given current economic uncertainties.

These are being worsened by reckless policy in part from the the United States, Schaeuble said, sharpening his criticism of the Federal Reserve's program to buy an additional $600 billion worth of U.S. government bonds. Pumping more money into the economy will not solve the country's problems, he said, adding that the world needed U.S. leadership that was currently lacking.

"With all due respect, U.S. policy is clueless," Schaeuble said. "(The problem) is not a shortage of liquidity. Late on Thursday, Schaeuble said Germany would take up this point critically with the United States both bilaterally and at next week's G20 summit of industrialised and emerging nations.

G20 Showdown

The Financial Times reports China tees up G20 showdown with US

China has curtly dismissed a US proposal to address global economic imbalances, setting the stage for a potential showdown at next week’s G20 meeting in Seoul.

Cui Tiankai, a deputy foreign minister and one of China’s lead negotiators at the G20, said on Friday that the US plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back “to the days of planned economies”.

“We believe a discussion about a current account target misses the whole point,” he added, in the first official comment by a senior Chinese official on the subject. “If you look at the global economy, there are many issues that merit more attention – for example, the question of quantitative easing.”

China’s opposition to the proposal, which had made some progress at a G20 finance ministers’ meeting last month, came amid a continuing rumble of protest from around the world at the US Federal Reserve’s plan to pump an extra $600bn into financial markets.

Complaints about QEII Continue to Pile Up

The list of complaints about QEII is long and growing: South Korea, Hong Kong, Brazil, China, Volcker Complain about Bernanke's QE Policy.

Add Germany to the list.

Geithner's Non-Plan is Just Hot Air

Geithner's plan to limit current account surpluses and deficits to 4 per cent of gross domestic product is flat out silly. Actually there is no "plan", just hot air.

For starters, why would the surplus countries who want to increase exports agree to it? Even if they did agree to it, pray tell what is the enforcement mechanism?

Unless Geithner proposes an enforcement mechanism that can actually stick, there is no plan.

The key point here is there is no enforcement mechanism, nor any discussion of one. There has been no enforcement mechanism since Nixon closed the gold window. That is all you need to know.

Thus, G20 will fail to accomplish anything. However, the show might produce some exciting fireworks for a change, given that currency wars have escalated.

Addendum:

A German reader suggests that Reuters improperly translated the German adjective "ratlos" which literally, that means "helpless", "at a loss what to do", "baffled", "perplexed", as opposed to "clueless".

Also, Geithner is now backing off his plan to use current-account surplus mandates to save the world's economy.

Please see Correct Translation of "Clueless" from German Reader; Geithner Backs Off His Own Plan for details.



Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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