Roads to war in Europe | 272 comments (272 topical, editorial, 0 hidden)

Re: Roads to war in Europe (none / 0)

So either Germany gives up its current account surplus or ...

No, its the other way around: we have to give up trade deficits. That is the purpose of structural reforms, which are necessary irrespective of whether we have the Euro or not. It has nothing to do with the Euro. The problem is one of adapting traditional societies to the competitive environment of the modern world.

by The European on Mon Mar 11th, 2013 at 07:02:19 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

One country can't have a surplus without another country having a deficit. And since the eurozone has largely balanced trade with the rest of the world, the problems of trade surplus and defiicits are internal to the eurozone.

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by A swedish kind of death on Mon Mar 11th, 2013 at 07:08:49 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

the problems of trade surplus and defiicits are internal to the eurozone

Some countries like Portugal have had a trade deficit for the last 60 years. That predates EZone and EU membership.
Anyways, jobs in the South are lost to China and the emerging economies not to the North.
The simple fact of the matter is that countries in the South have priced themselves out of low-cost manufacturing without managing the transition to high value added production. That is a structural problem that won't be solved by exiting EZone/EU. That problem cannot be solved by monetary policy.

by The European on Mon Mar 11th, 2013 at 07:31:29 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 3)

Some countries like Portugal have had a trade deficit for the last 60 years. That predates EZone and EU membership.

First there was the Bretton Woods gold standard, then there was the European Monetary System, then there was the Exchange Rate Mechanisms ERM I and ERM II. Throughout, Portugal ended up devaluing its currency. If there hadn't been a decades-long policy of fixed exchange rates, maybe Portugal might have had a gradual devaluing of the currency (not a periodic crisis) and a much smaller trade deficit (still a deficit, but within statistical error of zero).

Trying to keep your currency overvalued will produce the trade deficit, and then the devaluation crisis. An overvalued currency, however, is great for the local elite to take their rentier income out of the country.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 08:00:12 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

First there was the Bretton Woods gold standard, ...

First there was the Salazar dictatorship (Franco dictatorship in Spain) which pampered its domestic industry and made it noncompetitive. These traditional structures together with an over reliance on real estate speculation is what's wrong with these economies.

by The European on Mon Mar 11th, 2013 at 08:26:05 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 1)

Then why did France devalue serially, just as Portugal did?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 08:29:12 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

The simple fact of the matter is that countries in the South have priced themselves out of low-cost manufacturing without managing the transition to high value added production. That is a structural problem that won't be solved by exiting EZone/EU. That problem cannot be solved by monetary policy.

It must be solved by fiscal policy, and it can only be solved by fiscal policy if monetary policy doesn't work against it.

The EU allows no industrial policy, no independent fiscal policy, and has a monetary policy conducive to deflation, depression and unemployment.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 08:01:52 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

The European:

That is a structural problem that won't be solved by exiting EZone/EU

how can it be solved, in your opinion?

keynesian job creation? government investment of citizens' taxes to provide employment and teach skills to make them productive?

whose fault is it they don't get smart like the germans and invent more saleable stuff for the world economy, or price their labour cheaper than asia's?

if we are in a painful transition period between old and new capitalism, what is the goal the suffering is for?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Mar 11th, 2013 at 10:04:42 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

how can it be solved, in your opinion?

The Andrew Mellon way:

liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate... it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 10:15:12 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

whose fault is it they don't get smart like the ~~germans~~Bavarians and invent more saleable stuff for the world economy, or price their labour cheaper than asia's?

Fixed that for you

Edmund Stoiber once caused something of an uproar when he said "unfortunately, not everyone in Germany is as intelligent as in Bavaria".

(today's Newsroom)

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 11:23:36 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

Anyways, jobs in the South are lost to China and the emerging economies not to the North.

Because of the overvalued exchange rate relative to where it would be if the south did not have to subsidize German currency policy.

The simple fact of the matter is that countries in the South have priced themselves out of low-cost manufacturing without managing the transition to high value added production. That is a structural problem that won't be solved by exiting EZone/EU. That problem cannot be solved by monetary policy.

The simple fact of the matter is that "structural adjustment" is making that problem worse, not better.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 11th, 2013 at 04:12:00 PM EST
[ Parent ]

Re: Roads to war in Europe (none / 1)

But the accounting is still based on national borders. Which is a problem nobody seems willing to face.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Mar 12th, 2013 at 02:23:14 PM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

we have to give up trade deficits

Therefore, the Eurozone must run a trade surplus with the rest of the world.

And the rest of the world is going to accommodate that without allowing their freely floating currencies to devalue, exactly why?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 07:55:58 AM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 3)

So either Germany gives up its current account surplus or ...
No, its the other way around: we have to give up trade deficits.

The surplus country has policy space, the deficit country doesn't. Therefore it's the surplus country that has agency. Especially in a fixed exchange rate regime.

If the surplus country won't play ball, the fixed exchange rate system breaks down. The story of the past, I don't know, 150 years?

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Mon Mar 11th, 2013 at 08:14:56 AM EST
[ Parent ]

Re: Roads to war in Europe (none / 1)

No, its the other way around: we have to give up trade deficits.

The sum of all foreign trade must be zero. Ergo, to give up deficits, you must give up surpluses.

That is the purpose of structural reforms,

No, if that were the purpose of structural reforms, then the structural reforms would include confiscatory taxation of extreme wealth, sharp discounting of overvalued currencies, picking strategic industry winners for aggressive state investment, and imposing restrictive joint venture and local sourcing requirements for high-tech imports.

This is not what is being done, therefore the purpose of structural reform is not to do away with trade imbalances (unless you wish to postulate that those who peddle structural reform are all idiots who do not understand elementary import substitution strategies).

which are necessary irrespective of whether we have the Euro or not.

Why?

It has nothing to do with the Euro. The problem is one of adapting traditional societies to the competitive environment of the modern world.

If adapting to the competitive environment of the modern world leaves a large fraction of the population substantially worse off, then why should we not simply throw up protectionist barriers against foreign competition?

Competition is, after all, a policy, not an objective. If we can protect the interests of the bottom three quarters of the income distribution at the "cost" of wiping out the accumulated wealth of the top quarter, then that's a feature, not a bug.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Mar 11th, 2013 at 04:09:43 PM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

The sum of all foreign trade must be zero.

Never going to happen. Latvia, say, is never going to have a viable domestic automotive industry and Germany, say, is never going to have autarky in food production. The relative production costs, thus purchase price, for manufactured goods versus agricultural commodities means a steady trade imbalance between the two regions.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Mar 12th, 2013 at 02:34:21 PM EST
[ Parent ]

Re: Roads to war in Europe (none / 1)

And still the sum of all foreign trade must be zero, by the magic of double-entry bookkeeping: The exports of one state are the imports of another state. Sum up over the whole planet, and you have zero (so long as the rest of the galaxy does not pay us for the space probes we send them).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 12th, 2013 at 02:38:37 PM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

Trade is the flow of goods and services thus we need to look at Cash Statements rather than Balance Sheets. History shows there will always be a larger flow of cash from resource to resource-user regions. (Tho' I concede the current situation increases that flow.) Mostly, IMO, from the fact there are many more potential and actual resource regions producing, e.g., wheat, than resource-user regions producing, e.g., iPods. Also resource regions tend to be over-populated with respect to the per capita current market value of their goods in international trade.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Mar 12th, 2013 at 03:13:57 PM EST
[ Parent ]

Re: Roads to war in Europe (4.00 / 2)

Whichever way you look at it, at the macro level it has to net to zero. That's really not controversial, except to German politicians it would seem.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Mar 12th, 2013 at 03:52:07 PM EST
[ Parent ]

Re: Roads to war in Europe (none / 0)

Surely you mean "fine us for parking the space junk we send them"?

_{It is rightly acknowledged that people of faith have no monopoly of virtue
- Queen Elizabeth II}

by eurogreen on Wed Mar 13th, 2013 at 08:51:33 AM EST
[ Parent ]

Roads to war in Europe | 272 comments (272 topical, 0 editorial, 0 hidden)

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