Michael Hlinka: What would Winston Churchill say about quantitative easing?
- November 11, 2010 7:39 AM |
- By Michael Hlinka
(Money Talks is a business column from CBC radio.)
By Michael Hlinka, CBC business columnist
Winston Churchill said: "The short words are the best words and the old words are best of all." I really like that quote. Because when people are trying to pull a fast one, they use long and complicated words and phrases that don't mean very much.
I wonder what Sir Winston would have thought of "quantitative easing."
It's been in the news a lot lately. The United States recently printed $600 billion to buy its own government issued federal bonds. This makes America's interest rates artificially low, with the additional impact of depressing the U. S. currency even that much more.
This "quantitative easing" has upset many countries upset leading up to the G20 Summit that started today in Korea. Nations from Brazil to China to Germany have come out and been highly critical of this latest attempt by the Obama administration to right the American ship of state.
One advisor to China's Central Bank described quantitative easing as "uncontrolled" money printing. Germany's Finance Minister was even more blunt. He thinks the policy is "clueless."
You have to believe that Winston Churchill - if he were around today - would be smiling!
Yet this criticism doesn't seem to be having much impact on U.S. policy. The rest of the world can complain all it wants. But it's crystal-clear that there is a broad-based consensus in the United States. America wants to devalue its currency, because if the greenback is cheaper, the United States will be able to export more and its imports will fall. The trade imbalance will be solved.
President Obama and his team must believe that this is the silver bullet that will solve the unemployment problem in the United States, because unemployment remains stubbornly close to 10 per cent.
The United States is going to do what it thinks is best for it. And the rest of the world should take this cue.
Anyone who knows the slightest thing about economic policy understands that America's trade deficits will not be fixed until it gets its government spending under control. Recent trade numbers prove this: The U.S. was $45 billion in the hole last month. Which tells me that the United States needs the rest of the world a heckuvalot more than the rest of the world needs the United States.
There's no reason for the U.S. dollar to be the world's reserve currency. There's no particular reason to kowtow to the U.S. President. If the United States wants to print money like it's going out of style as a band-aid solution to deep, structural problems, let it - even if they call it "quantitative easing."
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