Stiglitz Says Fed’s QE2 Creates ‘Considerable’ Risks

The U.S. Federal Reserve’s plan to boost purchases of bonds poses “considerable” risks by increasing capital inflows to emerging markets, Nobel Prize- winning economist Joseph Stiglitz said in Santiago today.

“All this liquidity that they’re creating is not going back to grow the American economy and is going to Asia and other emerging markets where it’s not wanted,” Stiglitz said. “Most of the countries around the world have begun to react. They put in capital controls, exchange rate interventions, taxes on these capital flows -- a variety of interventions.”