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The Eurozone has balanced foreign accounts. RoW is therefore not a surplus sink for the Eurozone. RoW not being a surplus sink, and China belonging to RoW, China cannot be a surplus sink.

This is elementary graph theory. So elementary, in fact, that you can prove it simply by drawing a graph with the nodes "Greece," "rest of Eurozone" and "Rest of World."

Then impose the boundary conditions that inflows must exceed outflows for Greece, and that all in- and outflows to RoW must sum to zero.

The only sink in that graph is RoE. China is not in the Eurozone, and is therefore not a sink.

Q.e.d.

This has been your first and last fee lesson in elementary graph theory. If anything here is unclear, look it up before venturing into discussions of international trade again.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 19th, 2012 at 06:25:41 PM EST
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