Ben S. Bernanke, the Federal Reserve chairman, argued Friday that currency undervaluation by China and other emerging markets was at the root of “persistent imbalances” in trade that “represent a growing financial and economic risk.”
….For the last two weeks, the Fed has been criticized for its Nov. 3 decision to inject $600 billion into the banking system through next June, resuming an effort to lower long-term interest rates….By defending the Fed’s actions, calling for global rebalancing and hinting that more fiscal stimulus might be needed, Mr. Bernanke’s remarks amount to an endorsement of crucial elements of President Obama’s economic approach.
But that endorsement, in turn, could further stoke criticism by Congressional Republicans, who say the Fed is defying voters’ skepticism about large-scale government intervention in the economy and setting the stage for inflation later.
It’s not great that Bernanke has to do this. But it’s great that he’s putting his cards on the table. I’m truly curious about just how far Republicans are willing to go to overtly take the side of China against monetary policy designed to help the American economy. I guess we’ll soon find out.