NEW YORK (CNNMoney.com) -- Growing criticism of U.S. Federal Reserve policy is fueling global tensions as leaders of the world's largest economies prepare to meet in South Korea Wednesday.
Last week the Fed announced it would pump another $600 billion into the U.S. economy through the purchase of long-term Treasuries, a move known as quantitative easing, or "QE2," since it is the second round of such purchases.
The move sparked fears that it could reignite inflation pressures, cause a new global asset bubble or spark a so-called "currency war" in which nations devalue their own currencies to keep their own exports competitive.
President Obama will hear those complaints later this week when he arrives at the G-20 meeting in South Korea, a summit of heads of state of the world's leading economies.
The harshest criticism came Friday from German Finance Minister Wolfgang Schäuble, who told reporters at a conference that, "With all due respect, U.S. policy is clueless."
"It's not that the Americans haven't pumped enough liquidity into the market," he said. "Now to say let's pump more into the market is not going to solve their problems."
Schäuble went further in an interview with the German magazine Der Spiegel in which he said the Fed's move undercuts efforts by the United States and Europe to get the Chinese to allow its currency to rise in value.
"It's inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money," he said in the interview.
Chinese officials have been more muted in their criticism of the Fed's move ahead of the G-20 meeting, saying that the reform of the international financial system and the actions of the U.S. central bank would be among the issues discussed at the G-20.
People's Bank of China Governor Zhou Xiaochuan, speaking at an economic forum in Beijing, said the Fed's move could be "a good choice" for the U.S., but might contribute to global imbalances by devaluing the dollar and causing a flood of cash into emerging economies, according to a report on the state news service Xinhua.
South African Finance Minister Pravin Gordhan, a prominent voice among finance officials from emerging economies, said the Fed's move was disappointing because it undermines the spirit of multilateral cooperation that is the reason for holding the G-20 meetings.
He said top finance and central bank officials agreed only recently that "given the high interdependence among nations in the global economic and financial system, uncoordinated responses would lead to worse outcomes for everyone."
Speaking at a press conference in India Monday, President Obama stressed that the Fed is independent from the administration, but he defended its recent policy move.
"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," he said at a joint press conference with Indian Prime Minister Manmohan Singh.
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Obama got some support from Singh, who said "a strong, robust, fast-growing United States is in the interests of the world. And therefore, anything that would stimulate the underlying growth and policies of entrepreneurship in the United States would help the cause of global prosperity."
Obama said trade balances and currency values would be among the topics discussed at the G-20. And he did not back down from the U.S. position that the currency of some exporting countries, such as China, needed to rise, although he did not cite China by name.
Criticism from inside the Fed
Some criticism also came from Fed Governor Kevin Warsh, who voted in favor of the action.
In an opinion piece in the Wall Street Journal Monday, Warsh defended the Fed's latest round of purchases of long-term Treasuries, but also acknowledged what he termed "nontrivial risks" of QE2, saying the central bank might have to change course if those risks start to materialize.
"I consider the [Fed's] action as necessarily limited, circumscribed and subject to regular review," he wrote.
He said it is up to Congress and the administration to pass pro-growth policies to spur economic growth and address long-term federal deficits.
"The Federal Reserve is not a repair shop for broken fiscal, trade or regulatory policies," he said. "Given what ails us, additional monetary policy measures are poor substitutes for more powerful pro-growth policies."
Dallas Fed President Richard Fisher, a frequent critic of Fed policy who currently does not have a policy vote, gave a speech warning that QE2 risked further declines in the dollar, more market speculation, higher commodity prices and a loss of credibility for the Fed. He said the economy is already so awash with cash that pumping more money into the system will do little to spur hiring.
"I asked that the FOMC consider that we might be prescribing the wrong medicine for the ailment from which our economy is suffering," he said
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