Pot, kettle, QE

US throws monetary policy stone from glass house

The United States is exporting a new commodity: hypocrisy. A semi-annual report from the Treasury criticises excessive economic reliance in Japan and the euro zone on central bank stimulus and calls for more fiscal and structural action. That's a bit rich, considering the Federal Reserve's balance sheet has ballooned nearly fourfold since the 2008 crisis and Congress is paralysed.

Of course, the Treasury is broadly right in its assessment. Both the euro zone and Japan might have benefited from a more balanced mix of policies. But the same applies at home. Fiscal matters have been stuck in political gridlock for years, while the Fed has been pumping money into the economy.

Sure, the Bank of Japan (BoJ)'s current balance sheet amounts to about two-thirds of 2014 GDP. That's a bigger proportion of output than the Fed's holdings, at about a quarter. But the BoJ has merely tripled its assets since 2008, while the US central bank has quadrupled its holdings to around $4.5 trillion. The European Central Bank's balance sheet-to-GDP ratio is only slightly less than the tally stateside, but it has grown much more modestly, by only a little more than half over the same period.

Meanwhile Tokyo actually ran a bigger deficit than Washington, according to data from the Organisation for Economic Co-operation and Development, at 8.4 per cent of potential GDP in 2014 compared to 3.9 per cent for the United States. The European Union's shortfall was admittedly smaller. But former Fed Chairman Ben Bernanke regularly begged Congress to provide more fiscal stimulus.

The Treasury's report avoids branding any other countries currency manipulators, one of its key purposes. Its authors surely know they're throwing stones from inside a very glassy house.