Political Risk Latin America Blog @PolRiskLatam

Emerging economies ready to counter the Federal Reserve latest liquidity injection

Posted in News and Articles, Political Risk by politicalrisklatam on November 4, 2010

by Merco Press, November 4th, 2010.

Asia and Latinamerica emerging economies anticipated that they would be implementing new measures to limit the inflow of capitals following on the United States Federal Reserve announcement that it would pump more liquidity into the faltering US economy.

Emerging economies expressed their disappointment with the Fed which makes even more difficult a significant agreement on global misbalances and exchange rates in the coming G-20 summit next week in Seoul, Korea. “As long as the world does not implement restrictions on the issuing of global currencies such as the US dollar, and this is not easy, then the occurrence of another crisis is inevitable” said Xia Bin, China’s Central Bank advisor.

Korea’s Ministry of Finance and Strategy said it had sent a message to markets on Thursday and will consider “aggressively” controls over the inflow of capitals while Brazil’s Foreign Trade Secretary anticipated that the Fed’s latest decision could trigger “reprisals and counter measures”. Thailand also considered the possibility of a concerted action to stop the avalanche of US dollars that are expected to “flood” emerging markets.

“The governor of the Central Bank has confirmed discussions with other central banks that are ready to impose joint measures if necessary to stop the possible influx of speculative money into the region”, said Thai’s Finance minister Korn Chatifkavanij. From India Central bank officials said that while the US has the right to stimulate its economy, others too have the right to defend their interests and any currencies’ agreement in Seoul had to be “a victory for both sides”, and this means “a political solution, so that is why we are all looking to Seoul”. (continue reading… )



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