* Obama says U.S. low growth or no growth danger to world
* China says U.S being irresponsible over QE
* Russia says G20 should have been consulted by Fed
* Trichet: c.bankers insist no currency weakening sought
(Adds Zoellick gold proposal, Fed members, Palin)
By Patricia Zengerle and Krittivas Mukherjee
NEW DELHI, Nov 8 U.S. President Barack Obama
defended the Federal Reserve's policy of printing dollars on
Monday after China and Russia stepped up criticism ahead of
this week's Group of 20 meeting.
The G20 summit has been pitched as a chance for leaders of
the countries that account for 85 percent of world output to
prevent a currency row escalating into a rush to protectionism
that could imperil the global recovery. [ID:nSGE6A703T]
But there is little sign of consensus.
The summit has been overshadowed by disagreements over the
U.S. Federal Reserve's quantitative easing (QE) policy under
which it will print money to buy $600 billion of government
bonds. The move could depress the dollar and cause a
destabilising flow of money into emerging economies.
"I will say that the Fed's mandate, my mandate, is to grow
our economy. And that's not just good for the United States,
that's good for the world as a whole," Obama said during a trip
to India. "The worst thing that could happen to the world
economy, not just ours, is if we end up being stuck with no
growth or very limited growth."
European Central Bank President Jean-Claude Trichet said
all participants at a meeting of the world's central bankers in
Basel, Switzerland had insisted they were not pursuing weak
"We're attached to avoiding excessive volatility. It's very
counterproductive for global growth and global stability," he
told a news conference.
The head of the World Bank suggested large economies
consider gold as an indicator to help set exchange rates. The
proposal was aimed at sparking broader debate that goes beyond
talk of currency devaluation wars. [ID:nSGE6A70A7]
CHINA, RUSSIA ATTACK FED MOVE
Washington has frequently criticised China, saying it
deliberately undervalues its currency to boost exports.
China says the United States, via the Fed, is engaged in
the same thing that it stands accused of. Some emerging nations
have already acted to curb their currencies' rise.
Resentment abroad stems from worry that Fed pump-priming
will hasten the U.S. dollar's slide and cause their currencies
to shoot up in value, setting the stage for asset bubbles and
making a future burst of inflation more likely.
"As a major reserve currency issuer, for the United States
to launch a second round of quantitative easing at this time,
we feel that it did not recognise its responsibility to
stabilise global markets and did not think about the impact of
excessive liquidity on emerging markets," Chinese Finance Vice
Minister Zhu Guangyao said on Monday. [ID:nTOE6A705G]
The Fed's quantitative easing policy was unveiled last week
to jeers from emerging market powerhouses from Latin America to
Asia. Russia renewed its assault on Monday. [ID:nTOE6A300V]
"Russia's president will insist .... that such actions are
taken with preliminary consultations with other members of the
global economy," said Arkady Dvorkovich, a Russian official who
is preparing the country's position in Seoul. [ID:nLDE6A70V6]
Fed officials on Monday sounded differing notes on the
program, one arguing it was a good way to fight deflation,
another warning it might need to be curbed.[ID:nN08222295]
Sarah Palin, a prospective 2012 Republican presidential
candidate, suggested the Fed "cease and desist" from the
program or risk permanently higher inflation. [ID:nN08238152]
The Bank of Japan on Monday said it too was ready to boost
asset-buying if it saw clear signs of a downturn. Worth 5
trillion yen ($62 billion), it is so far just a tenth the size
of the Fed's. [ID:nTOE6A700Y]
For more stories on G20 issues [ID:nTOE69K01G]
SCENARIOS-Can G20 make FX, trade progress [ID:nSGE6A703T]
Inflows to developing countries: r.reuters.com/hep83q
G20 economies comparison: link.reuters.com/men39p
Currency tensions in graphics: r.reuters.com/deh58p
Tensions over global imbalances: r.reuters.com/jux34g
U.S. DROPS KEY DEMAND
India is Obama's first stop in a 10-day trip to Asia that
will include Indonesia and Japan.
He will arrive in Seoul for the Nov. 11-12 summit weakened
by a crushing congressional election defeat for his Democratic
Party and under fire from all sides. Germany described U.S.
economic policy as "clueless" last week. [ID:nLDE6A40JH]
The U.S. has already all but dropped its centrepiece
proposal for the G20 -- a measure that would cap current
account balances at 4 percent of gross domestic product,
something economists said was clearly aimed at China.
At the weekend, U.S. Treasury Secretary Timothy Geithner
backed away from the numerical target that had been rejected by
China, Germany, Japan and others in a sign that global
financial power had slipped from U.S. hands. [ID:nnN06143046]
On Monday, he was putting on a brave face, saying China was
supportive of the G20's framework for rebalancing the global
economy, and that he expected broad consensus on it at the
The risk of a negative outcome in Seoul appears to be
increasing, or at the very least, an agreement that merely
papers over the huge gaps and allows countries to pursue their
own economic policies whether it be intervening in currency
markets like South Korea and Japan or printing dollars.
"Judging by the critical response of emerging market
governments to QE, the likelihood of a ceasefire in the
currency war is slim," RBC Capital markets said in a report
published on Monday.
(Writing by David Chance and Mike Peacock; editing by Stephen
Nisbet and Andrew Hay)