America is now isolated and the rest of the world is furious. The widespread use of capital controls and even a lurch into 1930s-style protectionism are both far more likely than just a few days ago.
The Federal Reserve's words may have been anodyne. "We will adjust the programme as needed to best foster maximum employment and price stability," said the US central bank's Open Market Committee. But by announcing another round of "quantitative easing", America is rightfully incurring the wrath not only of the emerging giants of the East, but the eurozone too.
The US had hoped China would use the forthcoming G20 summit in Seoul to accept America's proposal that net exporters should limit their current account surpluses to 4pc of GDP. Any prospect of that is now gone.
In the aftermath of the Fed's QE2 announcement, rather than agreeing to measures that would ease pressure on the US economy, China gave the States a public tongue-lashing. Measures to cap trade surpluses would "hark back to the days of planned economies", said Cui Tiankai, who will be one of China's lead negotiators in Seoul.
"We believe a discussion about a current account target misses the whole point, not least because if you look at the global economy, there are many issues that merit more attention – such as quantitative easing".
Sunday, November 7, 2010
The rest of the world goes West when America prints more money - Telegraph