US Battles World Criticism of Economic Policy

A growing global divide was evident on Saturday at a gathering of finance ministers from the 21-member Asia-Pacific Economic Cooperation forum,

after several days of sharp criticism of the Federal Reserve’s announcement that it would buy $600 billion in Treasury securities to bolster growth.

Countries like China, Brazil and Germany have warned that the unilateral move devalues an already-weak dollar,

A growing global divide was evident on Saturday at a gathering of finance ministers from the 21-member Asia-Pacific Economic Cooperation forum,

after several days of sharp criticism of the Federal Reserve’s announcement that it would buy $600 billion in Treasury securities to bolster growth.

Countries like China, Brazil and Germany have warned that the unilateral move devalues an already-weak dollar,

and could set off a destabilizing flow of funds into emerging economies

that will inflate their own currencies and make their exports more expensive.

On Friday, the German finance minister assailed United States monetary policy as “clueless,”

and China suggested that American officials explain their decision so as to calm international anxiety.

Though the atmosphere at the forum on Saturday was less charged, the United States was still on the defensive.

Treasury Secretary Timothy F. Geithner said that capital inflows into emerging markets were a vote of confidence in their fast-growing economies.

But Asian countries remained concerned about the effect of American policy.

“In the long term, there’s a hope that capital inflows will become good investments,

but in the short term, they work to strengthen local currencies and that’s a problem,”

the Japanese finance minister, Yoshihiko Noda, told reporters.

The Thai finance minister, Korn Chatikavanij, said that while he understood the need to address excessive trade surpluses and deficits,

it was important “at the same time that trade protectionism is not used as a tool to correct imbalances.”

Countries like Thailand, South Korea and Brazil that have successful export economies

have threatened to take measures to curb the flood of money

that has pushed up currency values and raised the specter of asset bubbles.

Increasing the money supply also weakens the dollar,

and has opened the United States to the charge that it is doing what it has long accused China of doing:

keeping its currency artificially weak, and helping to create dangerous imbalances in the world economy.

“Essentially, what the Fed’s doing is trying to get U.S. growth up on the backs of other countries’ growth —

at least that’s the sense that other countries have,”

said Raghuram G. Rajan, a former chief economist for the International Monetary Fund.

“You are forcing them to adjust by making their exports to the U.S. more expensive.”

Mr. Rajan said the Fed could not ignore the overseas impact of its policies.

“When the Fed has reached the limits of expanding U.S. demand

and monetary policy works primarily on the exchange rate, rather than on expanding spending,

then it comes dangerously close to direct exchange-rate intervention,” Mr. Rajan said.

The strategy differences will present a challenge to President Obama when he travels to Seoul this week for a meeting of the Group of 20 nations.

Mr. Geithner also encountered continued resistance to his proposal to set numerical limits to trade surpluses and deficits.

Asean, the 10-nation group of southeast Asian countries, will raise concerns over the United States proposals at the G-20 meeting this week.

The divisions underscore a deterioration in global camaraderie in recent months.

Less than five months ago, G-20 leaders in Toronto exchanged far friendlier words, pledging to work toward “shared objectives.”

At the meeting on Saturday, the atmosphere was one of labored consent,

with the United States and China notably stepping back from the critical tone that has colored recent comments on economic policy.

For most of this year, the debate over trade gaps has focused on China and the value of its currency,

which many countries have charged is being kept artificially low.

But with criticism of its policies mounting, the United States appears to have diverted attention to itself

and away from China, according to this article in the New York Times.