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Fed action gets an unexpected endorsement from India

U.S. President Barack Obama and Indian Prime Minister Manmohan Singh embrace Monday at a news conference in New Delhi.

Associated Press

U.S. President Barack Obama and Indian Prime Minister Manmohan Singh embrace Monday at a news conference in New Delhi.

NEW DELHI — When the Federal Reserve announced last week that it would buy $600 billion in Treasury bonds to help bolster the economy, it quickly came under attack from Germany, Brazil and China, which said America was trying to devalue the dollar to the detriment of other nations' exports.

On Monday, the Fed's plans earned a hearty endorsement from at least one foreign trade partner — India.

"A strong, robust, fast-growing United States is in the interests of the world," said Prime Minister Manmohan Singh. "And therefore, anything that would stimulate the underlying growth and policies of entrepreneurship in the United States would help the cause of global prosperity."

Singh, an economist by training, made his comments during a joint news conference Monday in New Delhi with U.S. President Barack Obama. The prime minister's support could help the United States deflect criticism of Washington's economic policies at the Group of 20 meeting in Seoul later this week, which both Obama and Singh will attend.

Obama also voiced support for the Fed policy in his first public comment on the action.

"The worst thing that could happen to the world economy — not just ours, but the entire world's economy — is if we end up being stuck with no growth or very limited growth," he said. "I think that's the Fed's concern, and that's my concern, as well."

Back in the United States, though, Kevin Warsh, a Federal Reserve governor with close ties to Fed chairman Ben Bernanke, expressed doubts Monday about whether the program would boost the economy. Warsh, who voted for the bond-buying program, also warned of "significant risks," including the potential for triggering excessive inflation.

China, Germany, Brazil and other nations with big surpluses in exports and their current accounts — a broad measure of foreign trade and financial dealings — tend to see the Fed's planned bond purchases as flooding the market with dollars. That cheapens the American currency, critics say, and makes other countries' exports less competitive on prices.

On Monday, Obama said the world needed a broad rebalancing.

"We can't continue to sustain a situation in which some countries are maintaining massive surpluses, others massive deficits and there never is the kind of adjustment with respect to currency that would lead to a more balanced growth pattern," Obama said.

Still, there was more criticism from finance ministries Monday. In Beijing, Zhu Guangyao, China's vice finance minister, said that America "did not recognize its responsibility to stabilize global markets and did not think about the impact of excessive liquidity on emerging markets."

Information from the New York Times and Associated Press was used in this report.

.fast facts

Trip pays dividends

Indian and U.S. companies have discussed or signed more than $14.9 billion in deals around President Barack Obama's trip that will support 53,670 U.S. jobs, the White House said Monday. The U.S. export content of the deals is estimated at $9.5 billion.

Associated Press

Fed action gets an unexpected endorsement from India 11/08/10 [Last modified: Monday, November 8, 2010 10:00pm]
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