FRANKFURT (MNI) – The U.S., like China, is actively following
policies to weaken its currency, risking a return to widespread
protectionism, former Federal Reserve Chairman Alan Greenspan wrote in a
piece published Thursday in the Financial Times.

Greenspan’s assertion contradicts comments made by senior U.S.
officials, including U.S. Treasury Secretary Timothy Geithner and
current Fed chairman Ben Bernanke, that a strong dollar is in the
interest of the American economy.

“The suppression of the renminbi and the recent weakening of the
dollar are, of necessity, producing firming exchange rates in the rest
of the world to, as they see it, the rest of the world’s competitive
disadvantage,” Greenspan said in his commentary. “Something has to give
in this arena of zero-consolidated current account balances.”

“China has become a major global economic force in recent years,
but it has not yet chosen to take on the shared global obligations that
its economic status requires,” Greenspan asserted. And now, he added,
“America is also pursuing a policy of currency weakening.”

Greenspan did not specify exactly which U.S. policies amount to
currency devaluation, but it seems likely he was referring to the policy
of the Federal Reserve to pump hundreds of billions of dollars into the
system through quantitative easing. The Fed last week announced a second
round of QE last week, in which it will buy $600 billion worth of
Treasuries over the next six months.

While accusations of China intentionally undervaluing its currency
are nothing new, Greenspan’s suggestion that the U.S. is also willfully
pursuing such a policy flies directly in the face of remarks made
recently by prominent officials on both sides of the Atlantic.

ECB President Jean-Claude Trichet, Executive Board member Jose
Manuel Gonzalez Paramo and other Eurozone central bankers have recently
reiterated the importance of the strong dollar comments by Geithner,
Bernanke and even President Barack Obama.

“I have no indication that would change my trust in the fact that
the Federal Reserve Chairman and the Secretary of the Treasury, not to
mention the President of the United States, are not playing the strategy
or tactics of a weak dollar,” Trichet said earlier this month.

“I trust their statement that it is in the interest of the United
States to have a strong dollar, strong vis–vis the other major
floating currencies, including the euro. And I fully share this view,”
Trichet added.

Gonzalez-Paramo told Spain’s business daily Expansion, in an
interview published today, that “we absolutely believe” the U.S. strong
dollar comments.

— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —

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