In the middle were Ben Bernanke and other top Fed officials, who struggled to make up their minds about who was correct. For months, they came down closer to the hawks and did little to help the economy. On Wednesday, they effectively acknowledged that they had made the wrong choice.

The risks of inaction have turned out to be the real problem.

The recovery has not been as strong as the Fed forecast. Businesses became more cautious about hiring after the European debt crisis in the spring. State governments began cutting workers around the same time, and the flow of federal stimulus money began to slow. Since May, the economy has lost 400,000 jobs.

Now — six months later, with Congress unlikely to spend more — the Fed is getting more aggressive. (And, yes, the idea that the doves are the advocates for aggression is indeed a bit odd.) Having long ago reduced its benchmark short-term interest rate to zero, the Fed will again begin buying bonds, as it did last year, to reduce long-term interest rates, like those on mortgages. Lower rates typically lead to more borrowing and spending by households and businesses.

Of course, the risks of taking action have not gone away. The new policy could eventually cause inflation to spike. All else equal, a policy that encourages more spending will cause prices to rise. And if investors begin to think that a dollar tomorrow will be worth much less than one today, they may refuse to lend money at low interest rates, undercutting the whole point of the bond purchases. Separately, the Fed, like any bond buyer, could end up losing money on the purchases, worsening the federal budget deficit.

http://www.nytimes.com/2010/11/04/business/04leonhardt.html?_r=1&hp=&pagewanted=print

Germany, China, Brazil and South Africa have criticised US plans to pump $600bn (£373bn) into the US economy.

German Finance Minister Wolfgang Schaeuble said the US policy was "clueless" and would create "extra problems for the world".

The US Federal Reserve could weaken the US dollar and hurt exports to America.

China's Central Bank head Zhou Xiaochuan urged global currency reforms, while South Africa said developing countries would suffer most.

He did not elaborate how the system should be changed.

'Undermining the G20'

South Africa's finance minister Pravin Gordhan warned that "developing countries, including South Africa, would bear the brunt of the US decision to open its flood gates without due consideration of the consequences for other nations."

http://www.bbc.co.uk/news/business-11697483

From Chris Flyod

I found myself unexpectedly heartened by American election returns, at least in one respect. For they have shown, once again, that the American people feel an abiding, angry – if deeply inchoate – dissatisfaction with the nation’s unjust, corrupt and dysfunctional political system. They know that something is profoundly wrong with the system, and so they keep voting one faction out and putting the other faction in, hoping to see some kind of change.

History gives this proof: in almost every national election for the past two decades, we have seen a change in control of either one or both houses of Congress or the White House. This has happened in 1992, 1994, 1998, 2000, 2002, 2006, 2008, and now again in 2010. The pattern is very clear. And it is not because Americans “prefer divided government,” as the dim chewers of Beltway cud like to tell us; it’s because they can’t get anyone in the system to address their concerns.

Yet with every turnover in factional control, we see a rush of earnest, serious analysis telling us how the results represent a vast sea change in America’s politics, culture, society, soul, etc. But somehow, two years later, these momentously meaningful tidal waves ripple into nothing on the empty shore. And again, that’s because they don’t actually signify anything beyond the by-now perennial unease and dissatisfaction.

What is less heartening, of course, is the fact that the American electorate never quite grasps the obvious, glaring, brutal fact that neither of these factions is ever going to change the system one iota if they can help it; they are the system, they are its servants, its enablers, its enactors. Then again, we are dealing with, to borrow Gore Vidal’s deathless phrase, the United States of Amnesia, where history doesn’t exist (except in the form of feverishly distorted self-righteous myths about America’s eternal super-duper specialness), and every election is a tabula rasa . The only flickering historical awareness that seems to exist in the American electorate is a vague sense that the gang they voted in two years ago hasn’t changed anything; better try the other gang again … forgetting this is the same gang they threw out the time four years ago, for the same reason.

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