China and Germany are, of course, very different from each other. Yet, for all their differences, these countries share some characteristics: they are the largest exporters of manufactures, with China now ahead of Germany; they have massive surpluses of saving over investment; and they have huge trade surpluses. (See charts.)Both also believe that their customers should keep buying, but stop irresponsible borrowing. Since their surpluses entail others' deficits, this position is incoherent. Surplus countries have to finance those in deficit. If the stock of debt becomes too big, the debtors will default. If so, the vaunted "savings" of surplus countries will prove to have been illusory: vendor finance becomes, after the fact, open export subsidies.I am beginning to wonder whether the open global economy is going to survive this crisis.
Both also believe that their customers should keep buying, but stop irresponsible borrowing. Since their surpluses entail others' deficits, this position is incoherent. Surplus countries have to finance those in deficit. If the stock of debt becomes too big, the debtors will default. If so, the vaunted "savings" of surplus countries will prove to have been illusory: vendor finance becomes, after the fact, open export subsidies.
I am beginning to wonder whether the open global economy is going to survive this crisis.
Then...
Politically, European stability, by that I mean "not shooting each other," stems from the Germany/French Post WW2 alliance. Germany withdrawing from the Euro would certainly cause 'tensions' in that alliance and, to an extent I cannot comment on, put that alliance in doubt.
Merkel & her band like to pretend they are oh so fiscally responsible but it's been demonstrated elsewhere in this diary that's a lot of malarkey.
All of which leads me to suspect Merkel & Co. are playing some kind of Game. What Game and Who it is directed to/at are questions I defer to those who have greater insight.
Was that a typo? Denmark is not in the Euro.
Danes and Poles are going to give-up the Euro
Brain Fart & bad way of putting it.
What I meant: these two nations would prefer to conduct business in the euro.
