NEW YORK (CNNMoney) -- Federal Reserve Chairman Ben Bernanke said Friday that unbalanced flows of money between nations is again posing a risk to the global economy and financial stability.
Speaking in Paris to a Bank of France conference, the Fed chairman said the uneven flow of funds into the United States from 2003 to 2007 was one of the key factors that led to the meltdown in financial markets in 2008.
He did not say the current flow of capital poses a threat of that magnitude. But he warned that while the global financial crisis is receding, "capital flows are once again posing some notable challenges for international macroeconomic and financial stability."
He did not specify specific nations by name in his brief remarks, but he appeared to be referring to the continued large investment in U.S. assets by China.
He argued that countries with large trade surpluses must do more to let their exchange rates be set by markets rather than intervening to keep their currencies low. He added that nations with large trade gaps must increase national savings by cutting large budget deficits.
But Bernanke said the collapse that followed the inflating of the housing bubble was not the fault of countries that flooded the United States with cash.
Instead, he blamed the United States, saying "the primary cause of the breakdown was the poor performance of the financial system and financial regulation in the country receiving the capital inflows, not the inflows themselves."
Bernanke did defend the Fed's controversial program to buy $600 billion in U.S. bonds, known as quantitative easing. Some argue that the purchases, dubbed QE2 since it is the second round since the onset of the financial crisis, is feeding rising global inflation.
Bernanke argued that the U.S. economy still needed more support and that the inflation pressure was coming from countries that are keeping their currencies undervalued rather than from the Fed's efforts.
"Resurgent demand in the emerging markets has contributed significantly to the sharp recent run-up in global commodity prices," he said. "More generally, the maintenance of undervalued currencies by some countries has contributed to a pattern of global spending that is unbalanced and unsustainable."