An interesting piece in today’sWall Street Journal sheds light on another European gripe concerning American policy – America’s central bank. In a statement this week following the Fed’s rate cut, ECB President Jean-Claude Trichet, according to the author

..came about as close as a member of the brotherhood ever will to calling out a fellow central banker: “In demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets.”

The author notes that although many Europeans blame the overly easy late Greenspan fed for the credit crisis and the housing bubble, it can also be blamed in part for some of the excesses that have benefited commodity exporting nations.

They shouldn’t get carried away, however, because their own stock markets were showing earlier this week what could happen to European and Asian economies if the U.S. heads into recession. The $7 billion fraud at Société Générale and the mess at Britain’s Northern Rock mortgage lender also make clear that American bankers don’t have a monopoly on bad judgment. The currency reserves and sovereign wealth funds that many countries have been piling up are in substantial part the result of that same Fed mistake. This means they can vanish as fast as they arose if commodity prices fall again and the dollar rises. Recall the Texas oil patch, circa 1983, as Paul Volcker’s Fed corrected the inflation of the 1970s.

The question is what could cause commodity prices to fall? A U.S. recession certainly would have an impact and could be exacerbated if the emerging markets followed more than expected. Although a tighter Fed is no where in sight, it appears a rift is beginning to develop between the ECB and the Federal Reserve. Will this have an impact on trade balances? This rift also sheds light on the differing mandates of the ECB and the Federal Reserve. The ECB targets just price level while the US Fed looks at employment as well. It will be interesting to see how this situation plays out.