WSJ’s O’Grady: Fed a Currency Manipulator

Tuesday, 30 Oct 2012 07:47 AM

By Dan Weil

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Republican presidential candidate Mitt Romney has pledged to label China as a “currency manipulator” on his first day in office if elected.

But he’d do well to also look closer to home, says Wall Street Journal columnist Mary Anastasia O'Grady.

“To be consistent, Mr. Romney should call out the Federal Reserve on day two for engaging in its own currency manipulation by way of ‘quantitative easing,’ which undermines the value of the dollar relative to Latin American currencies,” she writes.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

In the same debate where Romney made his promise about China, he also said he would place more emphasis on trade with Latin America.

A weaker dollar hurts Latin countries’ trade balances by making their exports more expensive and their imports cheaper.

International Monetary Fund Managing Director Christine Lagarde recently warned that the easing programs of the Fed and other central banks in developed nations risk creating “asset price bubbles” in emerging markets.

That’s because the easing is pushing investors out of their low-yield home countries to emerging markets, where yields are higher, creating bubbles.

Jeff Cleveland, senior economist at money manager Payden & Rygel, views the Fed’s quantitative easing as manipulative of markets too.

"It's interesting to me that when the Chinese central bank buys Treasurys [with dollars it has purchased to restrain the renminbi’s strength,] that's currency manipulation,” Cleveland tells Yahoo. But “when the Fed buys Treasurys, well, that's just good economic policy."

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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