Federal Reserve Chairman Ben Bernanke has criticised China over its yuan devaluation policy, though not by name, according to the text of a speech he’ll be making today.
Bernanke attacks countries with persistent current account surpluses, noting the dangers they might cause to the system.
In particular, for large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account.
Sounds an awful lot like China, or Germany, where Bernanke is speaking today.
He also mentions the currency issue, noting that some countries (read China) have used it as, “part of a long-term export-led strategy for growth and development.” He says that strategy poses threats to the global macro economy, and a more heavy burden on countries with flexible exchange rates (read U.S.).
His argument is not different from that pushed by President Obama and Treasury Secretary Tim Geithner at the Seoul G20, which failed to come to a solution on the issue.
The speech highlights the “two-speed recovery” the world is currently experiencing, with the developed world growing much more slowly than emerging markets. Bernanke points out the dangers of such a recovery, and defends QE2 in that context, suggesting developed market growth is vital to continued growth in the emerging world.