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An automatic stabiliser would be a sort of tax on current account surpluses exceedign a threshold, which is what Keynes proposed at Bretton Woods to add stability to a gold standard system through his "international clearing union". But whether you call it a tax or a fee, its net effect is that of a direct transfer, and somebody will sooner or later do the math and publish the results on BILD.

Just today, Eurointelligence reports:

Mayer and Gros call for eurozone sovereign wealth fund

Writing in the FT, Thomas Mayer and Daniel Gros says that the inability by German savers to invest their surpluses is becoming a real problem. As the savings are intermediate through the banking sector, and the banks are now reducing their peripheral risks - and unable to take on exchange rate risk - Germany's Target 2 surpluses are exploding. They write that the situation is not all that abnormal, since there are few countries were large external surpluses are intermediated purely by the private sector. Saudi Arabia and Norway are examples where the public sector created sovereign wealth funds, while Switzerland and Japan rely on the central bank. They advocate the setup of a German sovereign wealth fund which would invest in a diversified portfolio, including assets outside the eurozone. They acknowledge that this proposal will be seen as a resurgent German mercantilism, which transfers the burden of adjustment to the rest of the world. But under the current circumstances, this is the lesser evil, as it reduces the overall tensions in the system.

I don't know why they insist on a "balanced portfolio" investing "also outside the Eurozone". The problem is entirely within the Eurozone! The Eurozone has about zero current account balance so there's no reason for the Eurozone to invest any surpluses abroad. It's German surpluses that should be invested in the Eurozone.

I think the EU already has such a sovereign wealth fund: it's called the European Investment Bank. Current account surpluses in excess of 4% of GDP could go to capitalise the EIB.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Tue Aug 28th, 2012 at 04:49:08 AM EST
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