It’s not the Federal Reserve nor chairman Ben Bernanke that critics should take to task for outsized monetary intervention.

It’s China.

That’s the message from House Financial Services Committee Chairman Barney Frank (D-MA), who issued a statement countering the open letter sent to the Federal Reserve by 23 Republican economists, analysts, think tank officials and Wall Street executives criticizing the central bank’s ;latest round of planned Treasury purchases -- now amounting to $900 billion -- in order to help heal the U.S. economy.

Rep. Frank blasts the letter writers for "joining in a broad attack by foreign central banks" on the Federal Reserve’s moves, foreign monetarists "who insist that America somehow must subordinate our own legitimate economic needs to their currency requirements." China in particular has been notably public in its criticism of the Federal Reserve, despite the fact it has opened wide its gushing fire hydrant of liquidity.

Shocked, shocked! is China’s reaction over what the Fed is doing -- even though its monetary base, equivalent to the U.S.'s M2 supply, is now an estimated 20% larger than the U.S.'s monetary feedstock, and despite the fact China's economy is only about two-thirds the size of the U.S. 

China opened its liquidity hydrants a long time ago to stimulate its economy, a policy that’s turned swaths of its country into a Field of Dreams parallel universe littered with empty towns and cities, waiting for people to come.

The problem for the U.S. central bank is this: deflation is endangering the U.S. economy at a time when Congress faces potential gridlock, which could put more pressure on the Federal Reserve to try to figure out a way to move the US out of an economy now at stall speed and to lower unemployment. 

Minutes from the Federal Open Market Committee meeting earlier this month on November 3d indicate a contentious debate behind the scenes at the central bank over further Treasury purchases. The minutes also indicate more than half of the policymakers at the Federal Reserve believe it will take until at least 2015 for unemployment to come down. 

The minutes also show deep fears about deflation, which the Fed believes gives it room to do more Treasury purchases as it sticks to its guns that inflation is not a problem for now. 

Inflationary measures are pointing downward, including capacity utilization which remains stuck below 75%, showing there is little risk of inflation for now. At the same time, fiscal and monetary discipline is only as good as the next election cycle, and that threatens the value and international standing of the global reserve currency, the U.S. dollar.

Here's what Rep. Frank said about the letter attack on the Federal Reserve:

“I was not surprised at the extreme hypocrisy of the Central Bank of China insisting that America – apparently alone among nations – has an obligation to subordinate its own legitimate economic needs to international currency movements, nor was I surprised that other central banks, including Germany’s, joined China,” Rep. Frank said in his statement.

Rep. Frank added: “What did disappoint me was to see conservative economists, high-ranking officials of previous Republican administrations, and Republican Congressional leaders share the attack by these foreign banks not simply on the substance of the Federal Reserve’s proposal, but on the very notion that America has a right to give a primary focus to our own economic need for growth at this time.”

He continued: “Debating American economic policy is one thing; joining in a broad attack by foreign central banks, who insist that America somehow must subordinate our own legitimate economic needs to their currency requirements, is quite another.”

Frank concludes: “But that is essentially what the Reagan-Bush-Bush economists have asserted in their letter to Chairman Bernanke when they say that ‘The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.’”

Economist Ed Yardeni has been tracking China closely. He says that the “Chinese have an inflation problem that is made in China despite recent attempts by Chinese officials to blame it on the Fed’s second round of quantitative easing.”

Specifically, Yardeni says “the foreign exchange reserves of the People’s Bank of China have been soaring because the Chinese have refused to let their currency appreciate.”

So it’s not “don’t fight the Fed—it’s don’t fight the People’s Bank of China,” he says.

As China gets set to announce its new five-year plan for the country next year, Wall Street is bracing for even more tightening by the Hermit Kingdom. China for the first time in three years has been increasing interest rates and, for the fifth time this year, bank reserve requirements in a bid to cool off a potentially overheating economy.

That’s largely because China has been spraying liquidity into its economy for years now. China’s M2 has jumped by 58.2% over the past two years, Yardeni says. Bank loans soared $1.4 trillion last year, Yardeni says.

But Yardeni says he took a look at the PBOC’s balance sheet, and he says that “China’s central bank continues to more than offset these recent tightening moves with quantitative easing (QE).”

Yardeni adds: “The Fed has gotten all the recent attention and criticism for its second round of QE. The PBOC has been the world’s champ of QE for years!”

Here’s what Yardeni says he found:

(1) From January 2001 through September of this year, the PBOC’s assets increased $3.2 trillion to a record $3.7 trillion, led by a $2.7 trillion increase in foreign exchange holdings to a record $2.9 trillion;

(2) During September, foreign exchange accounted for 78.5% of the total assets of the PBOC, up from 37.5% at the start of 2001;

(3) On the liability side of the PBOC’s balance sheet, “deposits of financial institutions,” a.k.a. bank reserves, rose from just $159.4 billion during January 2001 to a record $1.7 trillion during September. Yardeni says these are almost all required reserves, and have been amply provided by the PBOC to fund the huge expansion in China’s M2 and bank loans.