Brasília – The decision of the Federal Reserve (FED), the United States’ Central Bank, of circulating US$ 600 billion is a measure whose dubious effects will be akin to throwing dollars down on the economy from a helicopter. The evaluation was made by the Brazilian minister of Finance, Guido Mantega. This Wednesday (3rd), the FED announced the purchase of United States Treasury bonds as a means of injecting further funds and heating up the economy.
"Right now, the United States already has a low interest rate. There already is enough credit on the United States economy, and that credit is not going into production. United States consumers and investors are not using credit to invest," said Mantega after attending a ministerial meeting at Palácio do Planalto, the Brazilian presidential office.
To him, excess credit ends up devaluing the United States currency and the only result is the depreciation of the dollar, granting the United States greater competitiveness on the international market. "Proof of that is that Brazil currently has a trade deficit with the United States and that affects us," he said.
The depreciation of the dollar should affect emerging countries, because United States products become more competitive on the international market and take space away from these economies.
The minister, who has been criticizing this measure, claimed that he will do the same at the G20 meeting in Seoul, South Korea. The group’s leaders are going to meet next week, on the 11th and 12th. "Everybody wants the United States economy to recover. However, it is useless to throw down dollars from helicopters, because that will not lead to growth. It takes combining an expansive monetary policy and the fiscal policy," he said.
According to Mantega, it is important to increase credit and reduce interest rates, but this type of measure must be combined with a fiscal policy, to encourage consumption.
*Translated by Gabriel Pomerancblum
