Global Fed bashing casts shadow over G-20

NEW YORK (CNNMoney.com) — Growing criticism of U.S. Federal Reserve policy is fueling global tensions as leaders of the world’s largest economies prepare to meet in South Korea Wednesday. Last week the Fed announced it would pump another $600 billion into the U.S. economy through the purchase of long-term Treasuries, a move known as quantitative easing, or “QE2,” since it is the second round of such purchases.

The move sparked fears that it could reignite inflation pressures, cause a new global asset bubble or spark a so-called “currency war” in which nations devalue their own currencies to keep their own exports competitive. President Obama will hear those complaints later this week when he arrives at the G-20 meeting in South Korea, a summit of heads of state of the world’s leading economies.

The harshest criticism came Friday from German Finance Minister Wolfgang Schäuble, who told reporters at a conference that, “With all due respect, U.S. policy is clueless.” “It’s not that the Americans haven’t pumped enough liquidity into the market,” he said. “Now to say let’s pump more into the market is not going to solve their problems.”

Schäuble went further in an interview with the German magazine Der Spiegel in which he said the Fed’s move undercuts efforts by the United States and Europe to get the Chinese to allow its currency to rise in value.

“It’s inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money,” he said in the interview. Chinese officials have been more muted in their criticism of the Fed’s move ahead of the G-20 meeting, saying that the reform of the international financial system and the actions of the U.S. central bank would be among the issues discussed at the G-20.

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By Chris Isidore, senior writer

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