Fed doves and hawks take wing on global concerns

"All this discussion for some time of the United States losing its influence and Europe is superior, blah, blah, blah, turned out to be BS. We are the central central bank of the world. That is now well established."

So says Richard Fisher, the president and chief executive of the Federal Reserve Bank of Dallas, and a voting member of the Federal Open Market Committee, who was in Hong Kong last week to talk to the Asia Society.

This indeed is a period of unparalleled influence for the Federal Reserve, the United States central bank. Its policy of rock-bottom interest rates has fuelled a global debt boom, seen a tripling of key US equity indices since 2009 and, not incidentally, fuelled a property bubble in Hong Kong. Its balance sheet is an astronomical US$4.3 trillion, and its policies are emulated around the world.

Should anyone doubt the reach of the Fed, they only need to look back to May last year, when former Fed chairman Ben Bernanke first hinted he was looking at tapering, or the unwinding of the quantitative easing programme.

His fairly tame comment reverberated worldwide. First, there was a spike in US treasury yields, which sent money flying out of emerging markets, resulting in a mini-crash in the value of the Indian rupee and Indonesian rupiah, and major sell-offs in the share markets of those nations. The Hong Kong/China offshore bond market ground to a halt for two months and visions of the 1997-98 Asian financial crisis flashed before investors' eyes.

Markets stabilised in September last year, but suffice to say, the Fed matters, regionally and globally.

Fisher was in Hong Kong en route to Beijing, where he is meeting a group of economists, central bankers and other officials in a gathering called the Summer Palace Dialogue.