Brazil and China Governments Slam the FED’s QE Forever

The US Federal Reserve’s QE ‘forever’ hasn’t been welcomed by some of the major emerging market central banking peers.

Brazil’s Finance Minister Guido Mantega, according to a Nasdaq/ Dow Jones report, accuses the Fed’s third-round of quantitative easing as "stimulating currency wars”.  Mr. Mantega, thus, will “continue to take whatever action is necessary to prevent speculative flows from flooding into the country” through currency interventions that will prevent Brazil’s currency, the real, from appreciating.

Brazil’s central bank, according to Mr. Mantega, “is going to buy more reserves” through the “use of the so-called reverse swap auctions that remove U.S. dollar-hedging contracts from the futures market”

Mr. Mantega will also adopt other measures including higher taxes on investment inflows.

China’s head of the Central Bank also rebuked the Fed's quantitative easing policies.

According to Sydney Morning Herald 

THE head of China's central bank, Zhou Xiaochuan, says quantitative easing is not working and more targeted measures are required to channel credit into areas where they are needed the most.

Mr Zhou made the call in a speech delivered in April but not published on the website of the People's Bank of China until this week, as the chairman of the US Federal Reserve, Ben Bernanke, announced a new round of quantitative easing - an injection of cheap credit into the financial sector - aimed at resuscitating the sluggish US economy.

Mr Zhou criticised the flood of cheap money as an inflexible and orthodox approach, although he stopped short of naming the Fed. Chinese authorities have long expressed their displeasure at US quantitative easing policy measures, which have eroded the value of the Chinese holding of US dollar-denominated assets such as Treasury bonds. Beijing is the largest holder of US government debts.

In reality all these signify as the proverbial pot calling the kettle black.

Both Chinese Central Bank and Brazil’s central bank have engaged in the same policies of waging war against interest rates although through more subtle means.

For instance I pointed out last week of the leakage from the sterilization measures by Brazil central bank’s foreign reserve accumulation have led to a bank credit boom which a Financial Times analyst sees as credit (QE) driven economic boom.

Chart from Mao Money, Mao Problems

And given the huge foreign reserves of $3.3 trillion during the first quarter held by China, the same policy dynamic may have been implemented by the People's Bank of China (PBoC). Evidence says that the PBoC's balance sheet continues to swell.

The world of politics is like a game of the hot potato, where some entity would have to take the blame to cover for one’s malfeasance.