Last Friday at a banking conference in Frankfurt, Fed Chairman Ben Bernanke denfened the central bank's plan to improve US economy and reduce unemployment, and urged developing coutries to let their currencies raise in value.
Central bank officials from many U.S. trading partners, including Germany, have criticized the plan for potentially dangerous side effects. Bernanke defended Fed's decision earlier this month to pump $600 billion into the financial system by purchasing U.S. Treasuries because it is necessary as the unemployment rate has been persistently high in the United States, particularly among those who have been out of work for long periods of time.
He also noted that the Fed purchased Treasuries and other assets "on a large scale" during the financial crisis, which he said "appears to have been quite successful in helping to stabilize the economy and support the recovery during that period."
The "bifurcated" recovery is making it difficult to coordinate economic policies, he said, and is fueling tensions between nations that have large deficits and those that are running surpluses.
In addition, Bernanke complained that officials in emerging markets have prevented the appreciation of their currencies to the detriment of developed economies.
"Tensions among nations over economic policies have emerged and intensified, potentially threatening our ability to find global solutions to global problems," stated Bernanke.
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