China Warns on Unbridled Printing of Dollars

On Wednesday, the Federal Reserve announced plans to pump hundreds of billions of dollars into the U.S. financial system, “an expansive and unconventional new effort to try to get the sputtering U.S. economy on track,” as it was called by Neil Irwin of The Washington Post.

According to Irwin, the Fed will, in effect, print money to buy Treasury bonds — an extra $600 billion worth by June 2011 — in a bid to lower long-term interest rates. As pointed out by Irwin, “the Fed’s new path has risks. Inflation could spike down the road, creating bubbles in the stock market or housing prices, or causing the dollar to decline rapidly.”

Xia Bin, an adviser to the Chinese central bank, seems to share Irwin’s analysis. Responding promptly to the Fed announcement, Xia Bin said the following day that the unbridled printing of dollars is the biggest risk to the global economy. “As long as the world exercises no restraint in issuing global currencies such as the dollar — and this is not easy — then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament,” he said.

Perhaps Xia Bin is the professor teaching that course in Beijing in 2030?

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