Advanced Nations Should Skip Quantitative Easing, Kim Says
South Korea’s central bank governor urged developed nations to resist another round of quantitative easing even as a slide in global stocks underscored the concern that Greece may exit the euro, causing turmoil in markets.
“Additional quantitative easing will have more of an adverse effect than a positive effect,” Bank of Korea Governor Kim Choong Soo said in a speech prepared for a lecture at Hallym University, Chunchon, north of Seoul. “If liquidity remains ample for too long, it could lead to speculative activities.”
Asian stocks fell for a sixth day today and commodities dropped as talks to form a new Greek government failed. The U.S. Federal Reserve is likely to start a third round of stimulus in June, Goldman Sachs Group Inc.’s commodity research team, led by Jeffrey Currie in New York, wrote in a report May 9.
The MSCI Asia Pacific Index slid almost 3 percent at 2:48 p.m. in Tokyo, while Hong Kong’s Hang Seng Index (HSI) slumped by the most in six months and Standard & Poor’s 500 Index futures declined 0.2 percent. South Korea’s Kospi fell 3 percent and the won weakened 0.9 percent to 1163.95 per dollar.
South Korean officials from the finance ministry, the central bank and financial regulators will hold an emergency meeting at 7:30 a.m. tomorrow in Seoul to discuss the European debt crisis and financial markets, according to a text message from the Finance Ministry.
The U.S. central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing, or QE, from December 2008 to June 2011. The Fed is also replacing $400 billion of short-term Treasuries in its holdings with longer-term debt to keep borrowing costs down, under a program scheduled to end next month.
Meanwhile, South Korea’s export-dependent economy is recovering very slowly as most advanced countries are still struggling following the global financial crisis, Kim said. Gross domestic product expanded at the fastest pace in a year last quarter, mostly boosted by government spending and investments by semiconductor chipmakers.
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