P 200932Z MAR 09
FM AMCONSUL HONG KONG
TO SECSTATE WASHDC PRIORITY 7203
INFO WHITE HOUSE WASHDC
USDOC WASHDC
AMEMBASSY BEIJING 
AMCONSUL SHANGHAI
AMCONSUL GUANGZHOU 
AIT TAIPEI 0234
CDR USPACOM HONOLULU HI

UNCLAS HONG KONG 000529 
 
 
DEPT FOR INR/R/MR, INR/IC/CD, I/FW 
DEPT FOR EAP/PD, EAP/CM, EAP/P 
DEPT FOR VOA/BRF, TV-WPA 
WHITE HOUSE FOR NSC 
PRC POSTS FOR PA 
AIT 
USPACOM FOR FOR CIS PD ADVISER 
 
E.O. 12958: N/A 
TAGS: OPRC KMDR
SUBJECT: MEDIA REACTION: U.S. ECONOMY 
 
TOPIC: U.S. economy 
 
HEADLINES AND EXCERPTS: 
 
"U.S. starts its money printing machine to bolster up the market; 
this move foretells that the risk of the devaluation of the U.S. 
dollar and inflation have largely increased" 
 
The independent Chinese-language Ming Pao Daily News had an 
editorial (3/20):  "Since the financial tsunami, the U.S. has made 
tremendous efforts to stabilize the financial system and to restore 
the economy.  However, the effect is not obvious.  The U.S. Federal 
Reserve finally gambles all in a single throw and decides to buy 
US$300 billion treasury bonds within half a year.  This move is 
described as running the money printing machine.  We will have to 
wait and see the effect.  However, it is certain that this extreme 
measure will create an environment for the transfer of wealth in the 
investment market.  With a huge amount of U.S. dollars flooding the 
market, it portends that inflation and the devaluation of the U.S. 
dollar will come into sight one after the other.  For the Central 
government of Beijing and the SAR government, the chief mission is 
to reduce buying U.S. treasury bonds in order to avoid any further 
loss of the money of the people.  In addition, the Central 
government and the SAR government should study the de-pegging of the 
Hong Kong dollar from the U.S. dollar.  They should get ready and 
seize the opportunity to introduce the de-pegging in order to avoid 
Hong Kong being affected by the U.S. dollar and China being dragged 
into the trouble..." 
 
"Federal Reserve prints money, Premier Wen's nightmare comes true" 
 
The independent Chinese-language Hong Kong Economic Journal said in 
an editorial (3/20):  "...'In order to help improve the condition of 
the private credits markets', the Federal Reserve will buy a total 
of US$300 billion of U.S. long-term treasury bonds in the next six 
months.  This is the first time the Federal Reserve has ever done 
that.  Such a decision is very abnormal.  The market believes that 
in the era of 'zero interest rate', the Federal Reserve is moving 
toward a quantitative eaing of monetary policy.  In other words, it 
willstart running its 'money printing machine' to prin money.... 
The Federal Reserve is directly buyin treasury bonds and not from 
the secondary market  This move is known as 'monetization of debt'. 
It is equal to opening a door for the government'sdeficit 
financing.  It has sacrificed the indepedence of the Federal 
Resere's currency policy.  Once the gap is opened, the Treasury 
Department can make unlimited demands and it can urge the Federal 
Reserve to buy more ong-term treasury bonds.  The fiscal disciplie 
of the U.S. administration will all be gone.  The possibility of the 
large-scale devaluation of the U.S. dollar has largely increased. 
Premier Wen worries for the safety of U.S. treasury bonds.  The 
decision of the Federal Reserve on Wednesday has already issued an 
alarm to China." 
 
"Bernanke acts as Rambo, printing money will cause problems' 
 
The independent Chinese-language Hong Kong Economic Times commented 
in an editorial (3/20):  "The U.S. Federal Reserve yesterday 
announced after the Federal Open Market Committee (FOMC) meeting 
that it will print some 1.1 trillion U.S. dollars to buy treasury 
bonds and mortgage securities.  This is a move to ease the tight 
credit market.  The market said the Federal Reserve is like Rambo 
who fired his machine gun furiously.  All sectors hope that the 
Federal Reserve will succeed.  Otherwise the consequence will be too 
ghastly to contemplate....  Being in an unfavorable situation, 
Bernanke still decides to print money although he knows clearly that 
the risk is high.  The important point is, can he gain the market's 
confidence by means of strength, timing, arrangement and 
communication? It is believed that he can keep various unfavorable 
side-effects under control to prevent the market from challenging 
the Federal Reserve.  Only by this way, can the financial and 
economic crisis be rescued from the dire situation." 
 
"Frantically printing U.S. dollars to rescue the market, try to save 
the extremely urgent situation with a bold gamble" 
 
The center-left Chinese-language Sing Tao Daily News said in an 
editorial (3/20):  "While the reaction to the Obama administration's 
economic stimulus package is not too good and not too bad, the 
Federal Reserve runs the money printing machine to print some one 
trillion U.S. dollars to buy treasury bonds and mortgage securities, 
which result in 'an indirect interest rate cut'.  The scale of the 
market rescue measure this time is beyond one's expectations.  It 
shows that the Federal Reserve is 'tough' to make a bold bet to 
restore the market confidence....  The U.S. administration has to 
pay the price by tossing money out from the helicopter.  The U.S. 
dollar's trading against the gold, the euro and the yen has all 
dropped.  The flooding of capital will plant the seed of inflation 
when the economy recovers." 
 
"The U.S. Federal Reserve buys bonds, one has to wait and see the 
effectiveness of such a bold measure" 
 
The pro-PRC Chinese-language Wen Wei Po had this editorial (3/20): 
"The U.S. Federal Reserve decided on March 18 to maintain the 
federal funds rate at 0.25 percent.  It also claimed that it will 
use all possible tools to push for economic recovery.  The U.S. 
Federal Reserve will buy $750 billion mortgage-backed securities and 
buy $100 billion more GSE-issued (Government Sponsored Enterprises) 
debt securities.  In the next six months, it will buy a total of 
US$300 billion long-term treasury bonds.  The U.S. Federal Reserve 
is further adopting the quantitative easing of monetary policy.  Its 
move to buy U.S. treasury bonds is equal to running the money 
printing machine to bolster up the market.  This is a strong 
medicine which is toxic.  In the short run, it will be effective in 
stimulating the economy.  However, it will distort the economy in 
the long run.  It will step up the devaluation of the U.S. dollar 
and push for inflation.  This will cause a big harm to its creditor 
nations and the developing countries." 
 
"Federal Reserve's measures will cause more unrest in the market" 
 
The pro-PRC Chinese-language Ta Kung Pao remarked in an editorial 
(3/20):  "...Many commentaries fear that the Federal Reserve 
printing money will lead to more serious inflation.  However, this 
is just the future worry.  One should rather pay attention to the 
stability of the financial system now.  The capital of the Federal 
Reserve currently flows in a large quantity and it will flow out in 
a large quantity in the future.  This may lead to more uncertainty 
and fluctuation in the market.  Many private investors dare not 
enter the market.  Those who enter the market are making use of the 
opportunity to speculate.  The market will then become a public, as 
well as a private gaming platform.  It will add more troubles to the 
crisis.  The large-scale buying by the Federal Reserve in an attempt 
to push down the interest rates of various markets will also distort 
the financial system..." 
 
"It is risky to run the money printing machine and buy treasury 
bonds with a large sum of money" 
 
The pro-PRC Chinese-language Hong Kong Commercial Daily wrote in an 
editorial (3/20):  "As expected, the interest rate remains unchanged 
after the U.S. Federal Reserve had the FOMC meeting.  However, the 
Federal Reserve announced that it will buy US$300 billion long-term 
treasury bonds in the next six months.  Once the news came out, the 
bonds market and the currency market were immediately shaken.  Hong 
Kong Monetary Authority Chief Executive Joseph Yam yesterday warned 
that the fluctuation of the bonds market is unprecedented.  He urged 
investors to be careful....  It is not yet known if the Federal 
Reserve's measures are effective or not.  But it can be sure that 
the Federal Reserve has planted many uncertain factors and risk in 
the market by 'running the machine to print money and buy treasury 
bonds in a large scale'." 
 
DONOVAN