Op-Ed: Will QE3 be positive for global economy?

There is much speculation as to whether the United States' third round of quantitative easing, known as QE3, will set sail shortly.

Federal Reserve Bank of St. Louis President James Bullard said recently that a possible third round of quantitative easing (QE3) would face a "pretty high hurdle". It triggered much speculation as to whether the QE3 will be launched soon. Since the European debt crisis keeps deepening, the U.S. economy keeps weakening and the U.S. presidential election is entering a key period, it is quite possible that the U.S. Federal Reserve will launch the QE3 in a short period to improve the United States' economic slowdown, increase employments and win electors. The possibility that the QE3 will be launched is very large. As for the new monetary stimulus policy that will be declared by the U.S. Federal Reserve, the continuous loose monetary policy may lead to asset bubbles in emerging economies and formation of greater inflationary pressure. For one thing, the dollar-denominated commodity prices will be substantially improved, resulting in “imported inflation” for some emerging economies, like China. For another, the Fed’s policies will cause the dollar and dollar assets prices to face downward pressure, which may lead international investors to increase their investment into assets of the emerging economies. Moreover, the scale and pace of hot money inflows will probably be upgraded, thereby push up the price level of part of the emerging economies, and even give rise to asset price bubbles. Furthermore, the Fed's quantitative easing policy will lead to further U.S. dollar depreciation, which may result in a rise in global inflation expectations and intensifying the instability and uncertainty in the future trend of the global economy.