Federal Reserve Chairman Ben Bernanke on Friday defended the central bank's plans to spur U.S. economic growth, saying they could help reduce unemployment, and -- in a message aimed at China -- urged developing nations to let their currencies gain in value.
Nations need to work together to correct global imbalances as the world economy recovers at an uneven pace, the Fed chairman said at a banking conference in Frankfurt, Germany.
While praising the global coordination that helped pull the world's economies back from the brink of collapse, Bernanke said the sense of common purpose that resulted has "waned" and that tensions among nations have "intensified."
Bernanke's principal complaint is that officials in emerging markets have prevented the appreciation of their currencies to the detriment of developed economies -- the same argument employed by Obama administration officials in recent weeks in criticisms of China.
"The strategy of currency undervaluation has demonstrated important drawbacks, both for the world system and for the countries using that strategy," Bernanke said.
Bernanke also defended the Fed's decision earlier this month to pump $600 billion into the financial system by purchasing U.S. Treasuries. Central bank officials from many U.S. trading partners, including Germany, have criticized the plan for potentially dangerous side effects.
Bernanke acknowledged the rancor, but argued that additional stimulus is necessary given persistently high levels of unemployment in the United States, particularly among those who have been out of work for long periods of time.
"In taking that action, the Committee seeks to support the economic recovery, promote a faster pace of job creation, and reduce the risk of a further decline in inflation that would prove damaging to the recovery," he said.
Bernanke stressed that the Fed has the tools to drain money from the economy if necessary. He also noted that the Fed purchased Treasuries and other assets "on a large scale" during the financial crisis, which he said "appears to have been quite successful in helping to stabilize the economy and support the recovery during that period."
Read more:http://money.cnn.com/2010/11/18/news/economy/Bernanke_Frankfurt_defense/index.htm?cnn=yes
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