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Economics

Der Brexit-Segen für Europa und die USA

Jan 8, 2021 Melvyn B. Krauss

STANFORD – Die meisten Europäer sind glücklich darüber, dass Joe Biden der nächste Präsident der Vereinigten Staaten wird. Ob sie erkennen, dass Bidens Wirtschaftspolitik dem Euro und Europa Probleme bringen wird, ist eine andere Sache. Jedenfalls wird die neue US-Regierung versuchen, den Euro gegenüber dem Dollar stark zu halten, um die amerikanische Wirtschaft zu stützen.

Zweifellos wird das Weiße Haus unter Biden die US-Notenbank Federal Reserve unter Druck setzen, den Wert des Dollar niedrig zu halten, um die Ausgaben gegen die Folgen der Pandemie, für die Umwelt und für die Infrastruktur erhöhen zu können – unabhängig davon, wie viel zusätzliche Haushaltsstimuli sie dem Kongress entlocken kann. Und da der Fed-Vorsitzende Jay Powell bereits Donald Trump so viele Gefallen getan hat, wird er Biden dies ebenfalls nicht abschlagen können. So gesehen war es genial von Biden, Janet Yellen zur Finanzministerin zu ernennen. Als Powells Vorgängerin bei der Fed hat sie dort immer noch erheblichen Einfluss. So wettet die Wall Street aus gutem Grund für die nächsten ein oder zwei Jahre massiv gegen den Dollar.

Diese erwartete Wirtschaftspolitik Bidens wird dramatische Folgen für die europäische Wirtschaft haben, die immer noch stark von Exporten abhängig ist. 2019 fielen 46,9% des deutschen, 31,8% des französischen und 31,5% des italienischen BIP auf den Export. Also können es sich die Europäer nicht leisten, untätig zu bleiben, bis der Euro so stark ist, dass er ihre Exporte abwürgt.

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Henk Crop Jan 11, 2021

Whatever the boon, I think the Brexit is mainly a step of strategic nature.
It will be to the disadvantage of both the UK and the EU.
With the ECB stimulation package only some extra tracks have bought for an otherwise dead-end track.
The EURO remains unsustainable in the current situation. That is one common currency for some very dissimilar economies. To my recollecten there are hardly any successful examples in the world. But the ECB ought to know better. Now we are on the track of the USSR ( and many communist countries ), who tried and failed for 31 years to operate a common currency.
The reality is that Italy and France cannot compete, with the Northern members, on the world market.
There is no other solution for further EU integration than that these countries improve their competitiveness and bring their consumption in line with their output.
It is politically incomprehensible that the position of the ECB presidency over the past years has been filled by these two countries.
The EU challenge is how to build some cohesion among 27 very diverse members. Whether the EURO can survive is a matter of secondary importance.
Also, all kinds of monetary manipulations cannot hide the structural unbalance in the EU.
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Sing Koo Jan 10, 2021

The author has conveniently ignored the China equation. With an anticipated weak Dollar and America's anti-China sentiment, EU will soon be China’s dumping ground. It's GDP and economy will be victimized by China.
- Susan Robinson Jan 11, 2021
  
  There are gains from trade.
  
  The key is opportunity cost (this is comparative advantage, not competitive advantage, not absolute advantage).
  
  With lower opportunity cost, specialization and trade that will make larger quantities of goods and services available to consumers, so we’ve more of more (and most) goods/services available which, on balance, will deliver more advantages than costs—lifting hundreds and hundreds of millions out of poverty and benefiting billions of consumers in countries rich and poor.
  
  Poverty is a serious problem in many countries (including US having problem of inequality, racism and poverty, among others).
  
  With technological advances, physical capital, human capital, China (given its opportunity cost and its large size) has been able to manufacture many goods (like solar panels, home appliances, etc.) at lower and lower costs benefiting billions of consumers around the world rich and poor.
  
  This is important as cheaper goods help all people (especially the poor people, to help them to improve/lift themselves out of poverty).
  
  It is also very important to help all countries to fight global problems like climate change as solar panels (wind turbines, etc.) become cheaper and cheaper.
  
  Wages in China have been rising year after year, China has to move up the value-chain, so more lower-skilled jobs will be moved to other countries (India, Nigeria, etc.) with large populations still living in poverty, with more jobs in these countries, this is very good news as they can lift hundreds and hundreds of millions out of poverty.
  
  But no one will invest in a business if rioting mobs are destroying it. So we do need peace and stability to create certainty and confidence that will encourage investments, human capital developments, jobs creation to help to eradicate poverty and hunger, expanding the richness of human life in shared prosperity.
  
  We also cannot ignore inequality between countries, within countries and between women and men if we truly want to eradicate poverty and hunger.
  
  As a country’s economy develops and grows with global trade, there are winners and losers in our society but we cannot tolerate poverty and extreme inequality, so government does have a critical role to play to ensure certain level of social fairness through rules/regulations, taxes, government spending, policies to help the disadvantaged and people living in poverty, etc. to allow everyone to use his/her comparative advantage to specialize, to trade to ensure no missed opportunities in the overall economy that will make everyone better off.
  
  After 42 years of economic developments, building infrastructure and developing human capital, China has a lot of experience/ knowledge to share and help other countries fighting poverty and this should be welcomed as there are more than 700 millions people in the world still live in poverty, so we cannot be complacent to fight and eliminate poverty around the world.
  
  With international cooperation and global efforts to combat poverty worldwide, we can look forward to the day when poverty is eliminated sooner rather than later.
  - Sing Koo Jan 11, 2021
    
    China is a communist country ruled by autocracy. China’s ambition is to use its trade surplus from world trade to gain world dominance. It is taking advantages of nations that fall behind economically. China is not a partner of equal. It exports poverty to its trade partners by dumping. China’s economic advantage is a result of force labor, repressive governance, intellectual property thievery and international extortions. Any nation that trade with China under these conditions will be at risk of loosing its independence, ideology and sovereignty.
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jonathan Story Jan 10, 2021

Since 2010 at the latest, Germany has been following a nationalist path. Its leadership decided to impose deflation and stabilisation on western Europe; kicked Greece in the teeth when it was down; did so in order to show France what could happen if it strayed out of line; did nothing to meet Cameron's requests halfway; cozied up to Russia, and now to China. Mr Krauss is naïve in the extreme. What he does not understand is that the UK was in policy terms more supranational than the Pope, and a handy scapegoat because the UK leadership could never convince the British voting public that less democracy should be the price to pay for European " integration". Now the EU27 no longer have the scapegoat. They are landed with the problem of dealing with the Franco-German relationship, where Germany is the top dog.
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alex Finch Jan 9, 2021

This report is a bit delusional. I live in Europe and in my opinion socialist policies and high social transfers over decades have promoted a mindset of complacency in Europe. Let me be blunt - Europeans have become lazy, THEY HAVE BEEN ALLOWED TO BECOME LAZY, leading to a shortage of skilled labor in many industries (especially in healthcare, IT and the building industry - the most important industries of the future). Most Europeans are illiterate in finance. As Ex-Finanzminister of Greece Varoufakis recently reported in PS, Greece’s public debt is today 10% HIGHER than it was in 2015 when Greece was effectively declared insolvent. Yet homeownership has recently increased in Greece to about 75%, while in other EU countries like Germany and Austria homeownership is still only about 52% (and real estate in Greece is not cheap). It was reported that of all international cities Athens had some of the most spectacular fireworks this New Years Eve. It’s not just Greece, France and Italy also have major problems that have not gone away. Europe is living in denial, only the UK stopped the sleepwalking. Even Germany’s number one industry is now threatened by Tesla. IT in Europe is 10 years behind America and now even China. Europe is destined to become a tourist attraction for the world but otherwise irrelevant. Byron Wien recently suggested the Euro may weaken again this year. Let’s hope so, for Europe’s sake.
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j. von Hettlingen Jan 9, 2021

Melvyn Krauss says Brexit offers the EU a silver lining, and the timing could not be more convenient. With Britain out, the EU has taken steps in a quasi-federal direction - something previously unimaginable - that Britain always opposed. Now there is nothing that could stop the EU from adopting a new economic-policy model that is better equipped for current challenges, not least a stronger euro, which the Biden administration welcomes “in order to keep the US economy humming.”
According to the author, Biden will “undoubtedly pressure the US Federal Reserve to keep the value of the dollar low…. And having done so many favors for Donald Trump, the Fed chair, Jay Powell, will be in no position to refuse... In this context, it was a stroke of genius for Biden to appoint Janet Yellen to serve as Secretary of the Treasury.” As former Fed chair she was known for focusing more attention on the impact of the bank's policies on workers and the costs of America's rising inequality, and she is credited with helping steer the economic recovery after the 2007 financial crisis and ensuing recession.
The Wall Street is said to be “betting heavily against the US dollar for the next year or two,” and the new US “policy approach will have a dramatic effect on the European economy, which remains heavily reliant on exports. In 2019, exports accounted for 46.9% of Germany’s GDP, 31.8% of France’s, and 31.5% of Italy’s. Europeans cannot afford to sit idly by and watch the euro strengthen to the point that it strangles their exports.”
Germany should “deploy a fiscal stimulus,” which would “internalize” a large amount of EU trade, “rendering the euro’s appreciation against other currencies irrelevant. Instead of exporting to the US, Italians could export more to Germany and other northern eurozone countries, since the additional stimulus will have provided the means for increased purchases from the south. Europeans have a huge internal market.” It does not hurt to “militate against a runaway euro that could otherwise split the European Union.”
Germany abandoned positions that had been previously sacred - a tenacious policy of austerity. The federalisation of European debt, long taboo for the Germans, became possible. Thanks to Angela Merkel’s “greatest achievement,” the EU can now “borrow as a government does - a step toward sovereign stature and a means to finance the $918 billion pandemic recovery fund that a British presence would probably have blocked.” This “direction…toward a new model of greater EU fiscal stimulus and internalized trade” would lead to a deepening of the EU.
France’s President Emmanuel Macron has often spoken of a need for “strategic autonomy,” during the last four years of Trump’s presidency. At the heart of this idea lied the conviction that, confronted by Russia and China and a US whose unreliability had become evident, Europe must achieve its strategic military and technological autonomy. For Macron, France’s destiny lies in a sovereign Europe, operating “beside America and China.”
According to the author “the possibility of a mixed fiscal- and monetary-policy model….. would be far more effective than the strictly monetary-based approach that has dominated EU policymaking” since the 2008 financial crisis. “With the sovereign-bond-yield spread between northern and southern eurozone countries having narrowed dramatically,” the European Central Bank “has managed to integrate the two regions financially for the first time ever. Moreover, the yields on higher-risk periphery assets are now at or close to all-time lows.”
The new shift “could prove a strong antidote to European populism,” while helping to harmonize US-EU relations and benefit both the US and European economies.” In this regard, “no one in Washington, or Brussels should shed any tears for Britain’s departure. The Germans may not be eager to embrace an internalized trade model, but they should recognize that Brexit, in this case, is good for Europe,” and helps regain a sense of its value.
As the euro keeps reaching new heights, the European economy is “in a slump.” The strengthening of the euro against the dollar complicates the ECB’s long-elusive goal of boosting inflation to 2%. “In seven of the last eight years, inflation has been closer to 1% than 2%, and the market expects this to continue for the next decade. This is unacceptable. Fortunately, by allowing fiscal policy to be brought into the EU policy mix, Brexit is precisely what Europe needs to pursue a more effective macro-economic stabilization policy.” The US Fed is partly to blame for its “beggar-thy-neighbor” interest rate policy.
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