22 Jul 2013
Quantitative easing hot topic at the G20
FXstreet.com (Barcelona) - The group of the 20 most powerful economic nation met over the weekend in Moscow to exchange their view in a wide variety of subjects, yet, out of all the talks, quantitative easing practices took center stage, with finance officials pushing for more detailed and better communicated changes in loos monetary policies by top central banks.
The final draft communique, at which The Wall Street Journal had access to, and commented by Natasha Brereton-Fukui from Dow Jones, "highlighted the potential negative side effects of prolonged monetary easing, and underscored the harm that volatile currency movements and capital flows could cause."
Since the first hints about the intents of the Federal Reserve to taper QE before year-end, there has been sharp declines in all class of assets around the world, although the most notorious being seen in emerging-market currencies, bonds and equities.
The withdrawal of stimulus by the Federal Reserve has investors around the world understandably skeptical thinking that taking such action may led to an unintentional catastrophic chain of events, as the perception of the market continues to be the U.S. lacks the 'core' economic means to go through a real recovery without being artificially buoyed by the printing of free money.
At the G20 meeting, the Federal Reserve Vice Chairwoman Janet Yellen, in a well-prepared and carefully chosen words, said that the timing of the tapering is directly related to the ability of the U.S. to recover.
South Korea's finance minister Hyun Oh-seok was quoted by Dow Jones: "I believe the implication is that the unwinding of QE in the U.S. will take place in an orderly manner, and that the emerging economies will have to come up with their own policy response."
Meanwhile, China's Finance Minister Lou Jiwei, in what seems to be some very logical thinking, said that once the U.S. quantitative easing is no longer active or is reduced significantly, the chances are that after a short period of stabilization, the U.S. economy will likely weaken again, as consumption no longer supports growth, Lou said through Xinhua News Agency.
About the issue of deficit reduction in the medium term, G-20 officials still seem to approach the issue very vaguely, with the draft communique failing to indicate any concrete measures. Despite that, in an attempt to make it sound credible enough, it read: "Progress had been made in developing credible, ambitious and country-specific medium-term fiscal strategies."
On finding the right balance between growth and deficit reduction, French FinMin Pierre Moscovici, did not beat about the bush, saying: "there is no spontaneous consensus", while adding that current focus is only "growth and unemployment reduction", while other secondary yet not less important issues such as budgetary consolidation should be approached as midterm goals.
The final draft communique, at which The Wall Street Journal had access to, and commented by Natasha Brereton-Fukui from Dow Jones, "highlighted the potential negative side effects of prolonged monetary easing, and underscored the harm that volatile currency movements and capital flows could cause."
Since the first hints about the intents of the Federal Reserve to taper QE before year-end, there has been sharp declines in all class of assets around the world, although the most notorious being seen in emerging-market currencies, bonds and equities.
The withdrawal of stimulus by the Federal Reserve has investors around the world understandably skeptical thinking that taking such action may led to an unintentional catastrophic chain of events, as the perception of the market continues to be the U.S. lacks the 'core' economic means to go through a real recovery without being artificially buoyed by the printing of free money.
At the G20 meeting, the Federal Reserve Vice Chairwoman Janet Yellen, in a well-prepared and carefully chosen words, said that the timing of the tapering is directly related to the ability of the U.S. to recover.
South Korea's finance minister Hyun Oh-seok was quoted by Dow Jones: "I believe the implication is that the unwinding of QE in the U.S. will take place in an orderly manner, and that the emerging economies will have to come up with their own policy response."
Meanwhile, China's Finance Minister Lou Jiwei, in what seems to be some very logical thinking, said that once the U.S. quantitative easing is no longer active or is reduced significantly, the chances are that after a short period of stabilization, the U.S. economy will likely weaken again, as consumption no longer supports growth, Lou said through Xinhua News Agency.
About the issue of deficit reduction in the medium term, G-20 officials still seem to approach the issue very vaguely, with the draft communique failing to indicate any concrete measures. Despite that, in an attempt to make it sound credible enough, it read: "Progress had been made in developing credible, ambitious and country-specific medium-term fiscal strategies."
On finding the right balance between growth and deficit reduction, French FinMin Pierre Moscovici, did not beat about the bush, saying: "there is no spontaneous consensus", while adding that current focus is only "growth and unemployment reduction", while other secondary yet not less important issues such as budgetary consolidation should be approached as midterm goals.