Some form of carbon tax on imports seems indispensable too.

In the long run, we're all dead. John Maynard Keynes

It was applied to devaluations, when done the monetary route, but it's somehow not used when it takes the route of shrinking domestic wages, which really amounts to the same thing...

In the long run, we're all dead. John Maynard Keynes

Coulton had some good words on the UK outlook, such as its fiscal track record and history of monetary stability over the past 20 years.

Coulton applauded Ireland's 'dogged' pursuit of fiscal consolidation even during the recession

Isn't it just about production and efficiency? Am I wrong that it's about industrial infrastructure and high technology?

I really don't know.

When I hear the word, I just assume that it means that some countries both outwork and outproduce others, but a sure way to be more productive is to have more tools to make your efforts more efficient.

LONDON (MNI) - The large 'AAA' sovereign borrowers - like the US, UK, France and Germany - have 'exceptional financing flexibility', Fitch Ratings said today, but warned this is not enough to maintain their current rating.

The major AAA states must set out further credible consolidation plans in 2010 to secure their triple-A ratings, the ratings agency announced today in its 'Sovereign Review and Outlook' for 2010:

Is Fitch a single French company with offices in London and New York or are these independent companies? It would seem that there might be peril to a rating company with a history of recent questionable ratings, no downgrades prior to defaults, etc. if their actions appear poised to further damage the financial stability of the country in which the operate. One could imagine a new-found interest in their performance in 2008 in certain countries.

One could also imagine a phone call from someone at, say, Goldman Sachs to Fitch or S&P innocently inquiring as to what the appropriate fee might be to rate new bond issues from, say, the US Treasury. A downgrade of a major sovereign issue could introduce volatility that could require lots of additional re-ratings. How do we assess the issue of conflict of interest in such circumstances? Or does anyone bother?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

Globalisation implies that, ultimately, we are all competing with China in productivity, wage rates, "flexibility", workers rights, and perhaps even with human rights, but I remain convinced that long term, good human rights are a prerequisite to ongoing growth and development.

a) It's not feasible for the US, China and EU to all be net exporters at the same time.

b) A model of "healthy" growth (green issues aside) isn't in the mainstream that addresses this fact - the advice to every country is always to "become more competitive" - to run a trade surplus...

That is only possible with a positive trade balance. The fact that if everyone (and I mean everyone) tries to save, then everyone's income drops to the point that they're no longer saving is Keynes' paradox of thrift. For example,

Thus the old-fashioned view that saving always involves investment, though incomplete and misleading, is formally sounder than the new-fangled view that there can be saving without investment or investment without 'genuine' saving. The error lies in proceeding to the plausible inference that, when an individual saves, he will increase aggregate investment by an equal amount. It is true, that, when an individual saves he increases his own wealth. But the conclusion that he also increases aggregate wealth fails to allow for the possibility that an act of individual saving may react on someone else's savings and hence on someone else's wealth.

The reconciliation of the identity between saving and investment with the apparent 'free-will' of the individual to save what he chooses irrespective of what he or others may be investing, essentially depends on saving being, like spending, a two-sided affair. For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself. It is, of course, just as impossible for the community as a whole to save less than the amount of current investment, since the attempt to do so will necessarily raise incomes to a level at which the sums which individuals choose to save add up to a figure exactly equal to the amount of investment.

The above is closely analogous with the proposition which harmonises the liberty, which every individual possesses, to change, whenever he chooses, the amount of money he holds, with the necessity for the total amount of money, which individual balances add up to, to be exactly equal to the amount of cash which the banking system has created. In this latter case the equality is brought about by the fact that the amount of money which people choose to hold is not independent of their incomes or of the prices of the things (primarily securities), the purchase of which is the natural alternative to holding money. Thus incomes and such prices necessarily change until the aggregate of the amounts of money which individuals choose to hold at the new level of incomes and prices thus brought about has come to equality with the amount of money created by the banking system. This, indeed, is the fundamental proposition of monetary theory.

But let's take the case of Greece again. I happen to think that because Greece is undiversified with shipping and tourism contributing over 50% to GDP, that Greece should always run a surplus. Shipping and tourism tank in a recession, but in good times, these services are actual quite useful because they are the source of external funds. The problem with Greece, however, is not overspending. The salaries committed to the bloated public sector are still half the EU average and they are higher than the average salary in the private sector. As for private debt, the Greek number is below 40% to GDP so Greeks actually are not borrowing money on a personal level to consume. I'm assuming the average household is not in great debt.

What it all boils down to is that you have a poor country with a huge amount of people on welfare. I am not going to dismiss neoliberal arguments that Greeks would be better served with a more entrepreneurial spirit if the public sector was slashed. That seems plain on its face. But ultimately the argument about becoming better savers on a personal level is not going to help Greeks. They are a country in need of either new streams of wealth creation, or else a better policy for distributing the wealth created in already existing business sectors.

I tend to think they need to focus on the latter because the tension between the various classes of workers within Greek society is sapping the country's moral will. They need to get straight on policy and regulation and only then can they move on to wealth creation.

Then again, I live in the USA and the same tensions exist here, where the lower middle class are the bulwark behind the GOP, and paradoxically the more educated middle and upper middle class trends to the Democrats and doesn't mind sharing their wealth through taxes. Clearly, Americans are rowing the boat in opposite directions.

But the desire of the savers to continue to save (ie have surpluses) at a time when the borrowers/spenders are retrenching is becoming a problem. To the point: if this becomes a race to who becomes the most virtuous, everybody loses in the process.

More to the point: given that borrowers are governments now, the money from German savers would be more usefully employed, from the Germans' point of view, on German or European infrastructure than on US wars.

In the long run, we're all dead. John Maynard Keynes