SF Fedhead Yellen: US Interest Rates are Too Hot for Asian Markets
Dude, China, take the hint. Janet Yellen is telling you to unpeg from the US dollar as she and her Federal Reserve System colleagues are dead-set on doing whatever it takes to save the economy, even if that means taking the dollar down with them.
Don't say she didn't try to tell you.
WSJ's Real Time Economics:
A top Federal Reserve official said Monday U.S. monetary policy is too hot for China and Hong Kong and explained any trouble those nations ultimately face because of this situation arises from their own foreign exchange policies.
“Because both the Chinese and Hong Kong economies are further along in their recovery phases than the U.S. economy, current U.S. monetary policy is likely to be excessively stimulatory for them,” Federal Reserve Bank of San Francisco President Janet Yellen said. “However, as both Hong Kong and the mainland are currently pegging to the dollar, they are both to some extent stuck with the policy the Federal Reserve has chosen to promote recovery,” she wrote in a bank Economic Letter published Monday.
The central banker said that if China wants to prevent U.S. policies from overheating its economy and driving inflation, it will have to do something about its foreign exchange policy.
“Increased exchange rate flexibility could mitigate growing inflationary concerns, and also act toward easing global imbalances and encouraging the development of the household sector, a shift the Chinese government now officially says it wants,” Yellen said.
The Economic Letter in question may be found via FRBSF here.
Essentially, Yellen is both dismissing the massive bubble in China and admitting that they're openly tanking the dollar. That's cute. Damn you, Janet, your wacky ass is starting to grow on me.
There must be something in the water. Like sharks. And bubble-blowing idiots with their floaties on so they don't drown.