– “The Americans are lost”, says Mr. Schaeuble (Finance Minister of Germany).
With this sentence he reacted to the plan of the FED to push an additional of 600 billion US $ into the market and he obviously jeopardizes the relationship between the USA and Germany (ftd, 05/11/2010). But isn’t this somehow true?
Fact is, the US economy doesn’t seem to react as fast as hoped to the huge amount of money the FED pushed into the market. (see earlier blogpost)
The question is, is pushing even more money into the market the solution to their problem?
Countries like India and Australia are afraid of all the foreign liquidity which is coming in by investors. As their economies are performing so well and their interest rates are a lot higher, many people would like to participate in that success.
In contrast to the FED, the Reserve Bank of India and the Reserve Bank of Australia now raised their most important interest rates by 0.25 Points. This being a reaction to two contradictive goals they need to have in mind (ftd, 02/11/2010):
1) Stop the Inflation
2) Keep the exchange rate steady
It seems the FED not only does not help their own economy to get back on track, but also gets other countries into trouble.