For a common market, the problem is that as economies in the common market become more and more intertwined, and as supply chains cross and recross borders with greater frequency, volatile exchange rates interferes with the unit of account function of money, which is critical for long-term planning of large, complex industrial processes.

So its not so much that we have to think of the balance of payments differently, but that the trade-offs between floating and fixed exchange rates within the common market can shift in favor of fixed exchange rates.

For a common currency zone ... yes, of course. While the central banking system for a common currency might be federalized in a variety of ways, complicating the process of making monetary policy, or the process of working out what the monetary policy actually is, one money can have only one monetary policy with respect to underlying cash interest rate and only one foreign exchange rate with each other currency.

The most relevant balance of payments for the Euro-zone is, of course, the aggregated Euro-zone balance of payments. However, that is impolitic to make a big deal about, because it would be one more road-block to expanding the Euro-zone to include more of the EU membership, so I guess everybody just continues to publicly pretend that it is the national balance of payments that matter, while in private running up spreadsheets to aggregate the Eurozone nation accounts when they want to look at what is really going on.

Balance of payments for individual US states would be meaningless ... regional import/export flows are relevant, and possible to estimate to a certain extent, but working out capital accounts data would be, on the one hand, extremely hard and on the other hand, pretty much pointless, since there is no way that the US$ is going to collapse in value because of a rush of capital flows from California to New York or New York to Illinois ... given that no currency exchange is required in the funds so that the flow of funds has no effect on any US$ exchange rate.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.