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That is the immediate question. I say that isn't the case and Jake tries to disprove this by talking about what happens with a CA deficit and no nominal growth in infinite time period.

A straw man, since I am talking about right now. And of course a small CA deficit is sustainable about a long time period. The data you researched regarding Germany show that Germany had a CA deficit from 1990 until 2002 without any trouble.

So my thesis is that a moderate CA deficit like France or Slovakia or Italy is no reason for worry.      

by IM on Wed Sep 7th, 2011 at 06:33:50 PM EST
[ Parent ]
That is the immediate question. I say that isn't the case and Jake tries to disprove this by talking about what happens with a CA deficit and no nominal growth in infinite time period.

It would really make this discussion a lot easier if you would make the effort to recall the chain of reasoning back more than three posts when you play these annoying "gotcha" games.

A straw man, since I am talking about right now.

Which just proves you don't know the first thing about how to look at macroeconomic data. To obtain an estimate of the structural surplus/deficit, you have to average over at least a couple of business cycles.

You are arguing like a climate change denier who says "but we had a really cold winter in 1992, so global warming isn't happening!"

And of course a small CA deficit is sustainable about a long time period. The data you researched regarding Germany show that Germany had a CA deficit from 1990 until 2002 without any trouble.

From 1991 to 2001, actually. And that's not a long time period. It's the trough-to-peak of the 1990s business cycle.

It would also be more informative to look at the CA position of the former West Germany only, since there was a considerable exodus of industry from the former Eastern Bundesländer under the Kohl Ostmark peg that strongly resembles the exodus from the European periphery under the Schröder Drachma peg.

So my thesis is that a moderate CA deficit like France or Slovakia or Italy is no reason for worry.

And since France and Italy are already under attack, your hypothesis was falsified even before you proposed it.

As fail goes, that's a really impressive example.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 02:30:02 AM EST
[ Parent ]
Under attack? Define that. You use such a loose word that you can prove anything with that.

And you are destroying your own argument. I won't even mention that as usual you don't know the slightest thing about german economic history. If we look at structural deficits and surpluses, the german CA surplus you obsess about vanishes. More importantly, there isn't much of a CA deficit in France or Italy. Or Ireland.
And before you start again babbling - climate science? Case of physics envy? -  if we are only talking about six or seven countries, two or three countries are more then an isolated data point.

by IM on Thu Sep 8th, 2011 at 04:36:20 AM EST
[ Parent ]
Under attack? Define that.

Where have you spent the month of August?

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 04:38:35 AM EST
[ Parent ]
Under attack? Define that.

You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero.

In a unified currency zone, all subunits should be operating under the same risk-free rate. If they aren't, there is an implied exchange rate risk.

I won't even mention that as usual you don't know the slightest thing about german economic history. If we look at structural deficits and surpluses, the german CA surplus you obsess about vanishes.

In which fictional alternative universe?

Try averaging over the last three business cycles and get back to me.

More importantly, there isn't much of a CA deficit in France or Italy. Or Ireland.

I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith.

And France and Italy have structural CA deficits, which means, given that the ECBuBa is pursuing a long rate in excess of nominal growth, that they are vulnerable to Soros attacks.

if we are only talking about six or seven countries, two or three countries are more then an isolated data point.

But you only have one country. Not two, nevermind three.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 07:59:07 AM EST
[ Parent ]
"You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero."

In other words, everybody is attacked.

"In a unified currency zone, all subunits should be operating under the same risk-free rate."
Why? What about default risk?

"In which fictional alternative universe?

 Try averaging over the last three business cycles and get back to me."

You really seem to think germanys economic history started in 2002. It hasn't. And prior to that the CA tended to be balanced.

"I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith."
You can't handle dissent well. You claimed a perfect prediction record for your hypothesis, I pointed out that Ireland doesn't fit your hypothesis and you then grudgingly admitted that. Where exactly is the bad faith? You just omitted Ireland in your first comments.

by IM on Thu Sep 8th, 2011 at 08:19:41 AM EST
[ Parent ]
"You are under attack when your risk-free secondary market spread against the lowest rate in the currency zone is statistically distinguishable from zero."

In other words, everybody is attacked.

No. Finland is not under attack.

"In a unified currency zone, all subunits should be operating under the same risk-free rate."
Why? What about default risk?

Only relevant to the private part of the foreign debt, which is why I was talking about the "risk-free" rate.

"In which fictional alternative universe?

Try averaging over the last three business cycles and get back to me."

You really seem to think germanys economic history started in 2002.

"The last three business cycles" is 1985 to 2008 (approx.).

You do know what "business cycle" means, right?

"I never claimed that Ireland was a currency crisis, and you should fucking well know that by now if you are arguing in anything that remotely resembles good faith."
You can't handle dissent well. You claimed a perfect prediction record for your hypothesis, I pointed out that Ireland doesn't fit your hypothesis and you then grudgingly admitted that.

There was nothing grudging about that. I pointed out from the first day that Ireland and Greece were totally and fundamentally different. This is not a problem for my hypothesis, any more than the existence of suicide is a problem the prosecutor in a case against a suspected serial killer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 8th, 2011 at 08:39:21 AM EST
[ Parent ]
"In a unified currency zone, all subunits should be operating under the same risk-free rate."

Why? What about default risk?

1. What about the Eurozone's "no-default rule"?

You can't have your cake an eat it, too. The combination of the following is an example of having your cake and eating it, too:

  1. The GSP
  2. Growth and Jobs
  3. No default
  4. No bailout
  5. No fiscal transfer
  6. Beggar-thy neighbour neomercantilism
  7. Subordinating fiscal policy to the financial markets

Something has to give. The first thing to give was the GSP (violated by the Francogerman axis which then went on to convince the Council to change the rules) followed by "growth and jobs", then "no bailout" and "no fiscal transfers". Soon the "no default" rule will be breached, too. And then we may not have a Euro any more.

All of this could have been solved very simply and cheaply in February 2010 but it wasn't.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Thu Sep 8th, 2011 at 09:11:51 AM EST
[ Parent ]

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