Fischer Prefers Capital Flows to No U.S. Growth

Bank of Israel Governor Stanley Fischer said he would prefer to deal with capital flows driven by efforts to boost U.S. output rather than face the consequences of stagnation in the world’s largest economy.

“I’d much rather the United States grew, and we had to figure out what to do about these capital flows, than we had an easy time dealing with capital flows while the United States didn’t grow,” said Fischer in remarks today at the Peterson Institute for International Economics in Washington.

International Monetary Fund Managing Director Christine Lagarde said in Tokyo on Oct. 14 that “accommodative monetary policies in many advanced economies are likely to spur large and volatile capital flows to emerging economies.” Brazilian Finance Minister Guido Mantega has called the monetary policies of some developed nations “selfish” and said he would do whatever is necessary to stop them from hurting his nation’s economy.

“I don’t think they’re currency wars but in Brazilian terms what’s going on is described as currency wars,” Fischer said. “I think it’s the natural efforts of countries to make their economies grow, like the United States.”

The Federal Reserve under Chairman Ben S. Bernanke has engaged in three rounds of outright bond purchases known as quantitative easing to stimulate the U.S. economy.

Bernanke has rejected arguments that monetary policy in the U.S. is destabilizing emerging markets and said there is a lack of evidence that advanced economy monetary policies are the main reason behind emerging-market capital flows.

Fischer has previously said he supports the third round of quantitative easing in the U.S.

Fischer was in Washington to honor the retirement of John Williamson, a senior fellow at the Peterson Institute, who established a set of 10 free-market policies labeled as the “Washington Consensus.”

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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