德国：失衡还是错乱？

May 11, 2017 Barry Eichengreen

汉堡—对美国总统特朗普来说，衡量一国经济优势的指标是其经常项目余额——即商品和服务的出口减去进口。当然，这一思想是最糟糕的经济无知。它是我们所熟知的重商主义的基础。重商主义包括一系列两百年前就已经被证明是错误的过时的信念。重商主义表明，除了其他方面，德国是世界上最强大的经济体，因为它拥有最大的经常项目盈余。

2016年，德国经常项目盈余大约为2,700亿欧元，或GDP的8.6%，这让它成为特朗普之怒的巨大目标。其与美国之间的650亿美元双边贸易盈余更使其成为显而易见的目标。作为欧元区成员国，德国没有汇率可以操纵——但这一点并不重要。德国对美国出口品相对开放，其决策者需要受到欧盟反补贴规则约束——忘了这一点吧。当一国与某些贸易伙伴存在顺差，但同时与另一些贸易伙伴存在逆差时，双边余额与福利无关——没看见这个事实。特朗普有了一个替罪羊——这才是全部意义所在。

回到现实世界，德国外部盈余的原因不在于它操纵了货币或歧视进口，而在于它储蓄多于投资。储蓄减去投资正好等于出口减去进口，这一巧合不是经济理论，而是会计恒等式。总体而言，德国花的比生产的少，所的差额必然会表现为净出口。

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0 Comments on this paragraph, 48 Comments on this article

Muhammad Ali Nasir Sep 11, 2017

Beautiful column by professor Eichengreen, in fact the empirical evidence suggests he is 100% right, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3031433
A new reply to this comment has been posted.
Maciej Krzak Jun 9, 2017

A very good piece that clearly and step by step outlines how an economist should think about the current account surplus not only of Germany but in general. I will recommend this dissection to my students.
I have only one difference with Mr. Eichengreen. I think that the exchange rate matters. Appreciation of the German euro would do a lot of difference and raised German imports as their GDP per head would be higher as measured in the terms of a basket of goods they actually buy on average. Not to mention that their goods and services would become more expensive despite the fact that they are more like Swiss and compete more in quality than price. Think about CPI, which includes the prices of imported goods, not the GDP deflator.
Since the German euro can't firm against the Rest-of-the-Eurozone euro they should undergo a so-called internal appreciation, the opposite they suggested so vigorously to the crisis countries. Raise the wages to increase disposable incomes and the ULCs! This would tend to balance the current account in Germany on top of tips given by Barry Eichengreen.
Best regards,
Maciek Krzak
Lazarski University, Warszawa, Poland
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Mauricio Duran-Loriga May 21, 2017

Eichengreen, this article is pure rag.

Germany is the ONE currency manipulator. It uses the ECB as a proxy for cosmetic reasons. By 2000, Germany sank in malinvestments, and ordered the ECB to crater rates and foster a credit bubble in southern countries. That saved the German day.
By the current decade, the Germans ordered the ECB to buy any European ailing bonds, avoiding the collapse of the entire German banking sector.

That is a circumvention of EU anti-subsidy regulations. In plain sight. Europeans consumers are given free lunches to buy German Bratwurst. Germany can save thanks to that mechanism. No other.

Take back the Y2K rate cuts and Germany would have sunk into the debt oblivion. What you call German savings is the money stolen from European citizens through the ill-designed Euro, with the stellar participation of the ECB.

If Europe was not the kidnapped customer of Germany, the current trade balance surplus would literally not exist.

That Germans are sensibly saving for retirement makes me puke. They are just profiteering of the wealth mining mechanism named EURO.

If Germany abandoned the Euro, the country would come back to the 80-90s, were its current account balance was terribly impacted by other European countries endless competitive devaluations. What do you smoke when you are alone?

Make sure this. Germany has no commodities. Germany has huge know-how. But know-how can be bought and exported, swiftly (as in 1940's). Germans will do whatever it takes to keep the Euro alive, because they know that doing otherwise will see current perceived wealth vanish in just a few quarters.

You depict the coming German elections as a classical LEFT vs RIGHT ideological fight. Come back to 2017. Merkel and Schulz will do whatever it takes to keep the Euro alive, regardless of the private/public spending (internal) debate.

One more thing. You assume that Germany is on an infinite course of both current account surplus and fiscal surplus. Isn't that a very infantile conclusion unbacked by two centuries long of economic data?

With the current funding needed to sustain endless growing mandatory welfare state, if the country incurs fiscal deficits (welfare state eats more than is produced), gross national savings crater, so does the investments needed to raise productivity.

Don't forget Germany too is starting a robotization spree. Do you know what is the economic result of millions of people being made redundant? That is ugly news for GDP, fiscal balance, trade balance, living standards...and so on.
And this is INEVITABLE.
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Christine Constable May 18, 2017

I think Germany is a hypocrit in that it waffles on about about "no cherry picking" in the Brexit negotiations, yet it has worked hard to "cherry pick" the business it will allow competition on and makes damn sure the areas it considers to be "strategic" are excluded from competition even within the EU - financial services is a case in point. Part of the reason the UK is so fed up with Europe, is that "despite" the UK being a partner in the EU for so many years, fully opening up trade in the areas the UK specialises in has been slow and half hearted. However, from the Uk point of view it has been generous in allowing Germany in to sell us virtually everything with no limitations. This is what makes it very difficult to swallow when you hear Mrs Merkle on her high horse wagging the finger to the UK, all those in the UK recognise you are staring at someone who represents a country who has mercilessly abused their position to keep for themselves trade with the rest of Europe yet continues to deny equal access to others.

Europe never was a union of equals. It was a German / Franco project and everyone else are really bit part players. The UK are there to stump up the cash to pay for the failing CAP payments and the costs necessary to bring Eastern Europe upto scratch and if the UK does not pay enough to keep up with the ever increasing demands, then places like Poland will socially "dump" their unemployed and welfare dependant so either way the UK pick up the tab.

The UK have been increasingly fed up with the lack of fairness in trade deals, in trade deficits, in the general abuse of the UK to pay large sums of money from which it benefits very little.

Germany has shown itself to be (what many of us always suspected) sharp to find its own national interest, even if it was to bury the expensive mark in the faltering Euro, it will still seek to dominate, bully and abuse its position to its own advantage. It does make the British smile when Mrs Merkel talks about Brexit as being a negative for both Europe and for the UK, when in truth it is a seriously negative sign that Germany has pushed the boundaries of what is reasonable and that we now see that all the EU is is a vehicle to enrich Germany and France, subsidies for France and markets for Germany and very little else for any other country, it is a sad and ghastly turn of events, but one the British were one of the few capable enough of exposing - the rest of the EU and certainly those tied to the Euro arte really client states of Germany and very very shortly their respective "national" budgets will be approved by Berlin....little surprise then that the UK had to leave ;)
- Mauricio Duran-Loriga May 21, 2017
  
  Adam Smith criticized the imperfections of human institutions. While the UK is a story of freedom, Germany and France are a story of forceful institutionalisation of the people.
  
  Germany can force people into poverty (G). It can force countries into economic slavery (PIS). Germany can force countries into political serfdom (FBAH). The German objective is to mine all possible wealth from these countries on a permanent basis,regardless of the people.
  
  Germany looks invincible. But its success contains the seeds of its complete failure. Germany will not be able to keep Europe together when robotization will sweep away labor force on a major scale. Serf countries will be plagued with unemployed masses unable to buy German goods.
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- M M May 20, 2017
  
  Henk, there was no French influence to speak of during the last 4 years, the Hollande days. If the German people really care about the EU project and their future within a peaceful and prosperous EU, they better vote for reinstating democracy in their country , the status quo is not sustainable for the EU, forGermanyor for the German people.
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- Henk Crop May 20, 2017
  
  Christine. I will not respespond to your many complaints, but just a few remarks. There are many faults with the EU, but I still consider Brexit a mistake to the disadvantage of both the EU and UK. And above all very irrational. The UK had very reasonable points with her resistance against immigration and the ECJ. Still she got a could shoulder from the EU. Then, no one expexted the outcome of the referendum or the unrealistic response of mrs. May (hard Brexit).
  - You say. The UK just suffered from the EU membership.
  Yes you lost your coal mines and shipbuilding industry, but you got a large financial industry in return. Which only could be so large because of the EU.
  - The UK paid to the EU. But all western EU countries did, because we wanted to help East European countries to get out from Soviet influence. So also the UK will be a little more safe now.
  - About the German- French axis. These two countries started with the EU. What went wrong is that there never was an axis including the UK.
  The UK was an EU member but it never treated the EU project as being also her project. Therefore there was a lack of willingness among other EU members to help the UK now.
  - You blame Germany for ideas that are actually promoted by the French. Like implementation of the Euro. Greece in the Euro. The centrally controlled government managed by a closed elite. Thereby they present a model, hundreds of years old, that now strangulates France as a model for the EU ( the ever closer Union ).
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- M M May 19, 2017
  
  Mrs Constable, I wish to add my voice to yours on this occasion. Merkel and the German Mafia are not immortal and the wheel, one day shall turn, and it shall not be a happy sight at all and then the German people will have no one to turn to, since by then they would have already run out of friends and allies. It is only a matter of time, patience..
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- jagjeet sinha May 19, 2017
  
  Christine, always nicely presented arguments.
  You just have to be patient to watch ... The final surprise - Electroral Revolt in Germany over Transfer Union.
  The revolts in Greece over Austerity and in Great Britain over Unlimited Migration - will be forgotten.
  Depopulation and absence of Development in Europe's Bottom Half - is rooted in German intransigence over Transfers.
  Single Currency in The Union is untenable without Transfers - and is the reason for Austerity and Unlimited Migration.
  President Macron - Europe's Kennedy - is invested with the Art of the Impossible : Upholding Single Currency Zone without Transfers.
  While hoping that Young always achieve the Impossible - unless Germany is willing to underwrite bottomless transfusions to The South.
  With Brexit, Unlimited Migration will now be headed to Germany and France - the option of Escape to the Little Island leaves no choice.
  Democracy will do the needful : Electoral Revolts - in France if Macron cannot deliver OR in Germany if Merkel relented on Transfers.
  Democracy in France v Democracy in Germany - Revolts in Greece and Great Britain does not count !!!
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Klaus Kastner May 16, 2017

A balanced current account is the worst kind of economic measure? I strongly disagree! What is bad are current account imbalances (positive or negative equally) if they are structural and sustained because such countries will be condemned to export or import capital which, when excessive, becomes a problem. The goal should be to have a more or less balanced current account over economic life cycles.
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Craig Klomparens May 16, 2017

The article states: "Germany has a high savings rate for good reason. Its population is aging more rapidly than most. Its sensible people are sensibly saving for retirement."

This is just not true. It appeals to people because it makes a moral problem out of a structural problem. German households are NOT saving. German households have been excluded from their share of the rising German GDP. The "savings" is being done by the government and business. I would point the reader to Michael Pettis and his book "The Great Rebalancing" or his website (China Financial Markets,) including this piece in which Mr. Eichengreen is mentioned: http://carnegieendowment.org/chinafinancialmarkets/69838
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Michael Parsons May 16, 2017

The only 'unhinged' thing here is the article's parroting of free-trade nonsense yet again. It was mercantilist policy that presided over and promoted the successful industrialisation and growth of England, Germany(1832 Customs Union etc.) and France, and it is a recognised develomental policy today! 'Free trade' simply paralyses a nation by freezing its comparative-advantage pattern, trapping it in its industry of the past or in primary production to the adavantage of more powerful rivals. If nineteenth-century Germany had allowed free trade, it would forever be importing modern manufactures from England and exporting wheat and potatoes!
As to a 'steady current account surplus' don't you mean a Sovereign Wealth Fund? and a wise precaution against changes in the terms of trae? when time may be needed for re-equipment?
Above all, the absurdity ofthis article is in its nineteenth-century hankering for some 'safe' eternal policy answer, like the gold standard was once thought to be. In fact what matters is the shrewdness of the subsequent independent political action, which a mercantilist policy at least make possible as an independent choice in the face of possible global attack. And as others have well indicated, greater infrastructure spending and increased grants for population growth can ease an 'excessive' trade surplus if that becomes a burden on trade-partners. So would subsidised emigration that transfers capital along with the emigrants.
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Karen Williams May 15, 2017

Point #1:

What history shows about mercantilism is that it DOES give countries that apply it successfully greater wealth and power.

What's wrong with it is that it is unsustainable. Eventually the trade-deficit countries become either unable or unwilling to carry an ever-increasing foreign debt load, and/or become unwillling to sell ever more assets into foreign ownership. When this happens, the mismatch in expectations between debtor and creditor nations tends to devolve into war. THAT'S why mercantilism is bad.

And point #2:

The USA cannot be considered guilty of mercantilism until it not only eliminates its longstanding trade deficit but actually runs surpluses long enough to counterbalance all those historical deficit years.
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Robert Bruce May 15, 2017

The article is half right, but we need to understand the bigger picture. Yes Germany gains competitive benefits from being part of the Euro, but this can hardly be termed "currency manipulation". We might just as well ask California to give up the dollar in order to benefit competitiveness of the rust-belt states.

The real reason for the German trade surplus is that they have built a World class manufacturing base that customers prefer to buy from. Frequently German goods are significantly more expensive than their competitors, yet customers are still willing to pay a premium for German design and quality. This productivity gap points to what should be the real solution to trade imbalances - for other countries to raise their own game to match German standards.

If there is a criticism of Germany it is that it has not done enough to spread its technical know-how to other countries around the World. The targets for increased German investment should therefore not just be domestic, but overseas where German owned companies and joint ventures could do much to help other countries raise their game. There may be historical reasons why the German mindset has remained so insular, but it could also reflect the same kind of "Them and Us" thinking that seeks to maintain a technical advantage over poorer countries, even within the Eurozone. In this sense they are not so different from Trump after all - seeing the Global economy as a zero sum game. In the 21st century we all need to take a longer term view of Global economic growth and come to understand the obvious truth - that "We are all better off, when we are all better off".

Robert P Bruce = author www.TheGlobalRace.net
- Steve Hurst May 15, 2017
  
  Robert
  
  If technical know how equivalence is gained globally - and in many areas it is not that far off (for example mobile phone battery tech is Chinese not European or American) - then all that is left is labour rate differentials acting against the West which has significantly higher tax levels to pay for welfare and social service expectations. Those labour rate differentials are not due to disappear and if they diminish Africa is next in line to keep them down. Further 'China' is the East Coast of China and only some 20% of their population which has industrialised.
  
  The obvious question is where are all these consumer goods people want to produce going to go
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Henk Crop May 15, 2017

When you consider that Germany has a birthrate of 1,5 children per woman and a birthrate of 2,1 is required to prevent the population from shrinking it is obvious where money could be spent.
That is also better than counting on immigration. The only immigrants available are from non-western cultures. Integration of these immigrants is often very expensive and lead to social friction. Therefore a generous investment in facilitaties to enable young families to raise children is a wise decision.
- Steve Hurst May 15, 2017
  
  Henk
  rates -
  Denmark 1.75
  Italy 1.37
  Spain 1.32
  Poland 1.32
  etc etc
  France is the only one in the EU above 2 (as 2014)
  Coupled with a youth unemployment ranging anywhere up to 75% in some locations there are major problems pending
  
  Italy in particular is a basket case > NPLs, demograpphic, youth unemployment, sovereign debt rollovers queuing. Judged too big to rescue
  
  It is not Germany that will bring the EZ down and the surplus held by Germany whilst delivered by the euro are just not enough to sort the Med Club or ultimately to subsidize the ex commie countries
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george sos May 14, 2017

the prudent SIEMENS ,was buying contracts all around "oiling" politicians with peanuts and getting overpriced returns for their stuff..The submarine makers were using all means to convince defence ministers of small countries to get into debt,so that they can put their finger in the honey of defence constracts,and so on,and so on....But it was the savers who created this monster right!!!!!....
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Léonard Lovallo May 14, 2017

“Germany saves more than it invests” is not the proper description, rather it is that Germany under-utilizes the savings of the German people. This will not change.
The ‘Germany problem” is that Germany cannot internally consume more than 50% of its industrial output thus export, export, export is an absolute imperative. Germany’s ability to execute this imperative quite nicely to maintain full employment derives from its undervalued currency. The Euro exchange rate is reflective of the aggregate of the EZ economies which include a number that to be charitable shall we say are rather less than robust, such as Greece, Portugal, and to a lesser extent Spain or not particularly dynamic such as structurally straight jacketed France and Italy. If Germany were to re-introduce the Deutsche Mark the v/USD FX rate would be about 1.40, not 1.10. For the German export economy 'la vie c’est bon'.
Then in Germany there is the peculiar philosophy that is the baseline of German economic thinking known as Ordoliberalism, which holds economics to be a part of moral philosophy. For Germans economic policy must not merely be practical but also virtuous and to the German debt is not virtuous –the German word for debt is 'schulden', the German word for guilt is 'schuld'. Explains Angela’s obsession with the “Black Zero” federal budget. Infrastructure spending, though necessary (I have driven on German roads), will not happen anytime soon. Besides the Germans are not particularly adept at large infrastructure projects –see the Berlin Brandenburg Airport originally scheduled to open in 2011, now scheduled to do so 2018, maybe.
It would be beneficial for both Germany and Europe for Germany to make changes and adjustments to its current economic model and philosophy however absent an obvious compelling domestic reason to do so; it will not be politically possible.
- Léonard Lovallo May 14, 2017
  
  Merci Jagjeet;
  Another Eurozone area where Germany is quite in another galaxy: the German Central Bank’s TARGET2 balance is now €830 billion.
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- jagjeet sinha May 14, 2017
  
  @ Leonard Lovallo
  Agree with your insights.
  I can recall your statistics that point to another diagnostic that suggests WHAT IS RIGHT.
  Equity market index changes for Eurozone countries
  In the ten year period from July 1 2005 to June 30,2015
  In local currency (Euro):
  Germany DAX: up 125%
  France CAC40: up 10%
  Spain IBEX35: up 5%
  Italy FTSE MIB: down 32%
  Adjusted for currency depreciation (EUR v USD):
  Germany DAX: up 93%
  France CAC40: down 5%
  Spain IBEX35: down 10%
  Italy FTSE MIB: down 41%
  
  Germany is quite in another galaxy - if you add the 8.6 % current account surplus, it has never had it as good.
  There is no reason why Germany will initiate the Reformation in the current brilliantly created predicament.
  The Establishment has been voted out in France - status quo was no longer acceptable, quite evidently.
  The solution - politically correct - must factor in the diagnostic.
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jagjeet sinha May 14, 2017

REFORMATION WHERE NEEDED
Reformation was needed in America 1971 - the genius of Kissinger - when Degaulle demolition of the Dollar standard needed PetroDollars.
Reformation was needed in China in 1977 - the genius was Deng XiaoPing - that now helps generate current account surplus China dreamt of.
Reformation was needed in India 1991 - access to Global Capital Flows - when 45 years of its erstwhile Frst Family was unable to deliver.
Reformation was needed in USSR 1991 - still groping for its talisman - when Gorbachev thought Perestroika would open the keys to Europe.
Reformation is not needed in Germany - the genius was The Euro 1998 - now helps in generating current account surplus of 8.6% of GDP.

Reformation is now needed in Europe - that followed from The Euro - now unable to contain uncertainty unleashed by dreams of EUSSR.
Austerity unleashed in Europe's weakest economies is beyond bursting limits - incapacitating consequences of The Euro will give way.
European Migration post 1999 exceeds even the worst predicaments post 1945 - without the tools needed for One Federal Republic.
Young President Macron has a mandate born out of disillusionment with The Establishment - status quo was no longer acceptable.
BREXIT has taken away the option of flooding One Little Island with Migration that Europe was endlessly producing.
German intransigence in preventing an endless flood of Transfers to The South and East is another Red Line, that Macron will confront.
The Enlightenment needed is not WHO IS RIGHT - but WHAT IS RIGHT. France, not Germany, is expected to lead.
Reformation that returns the Weakest in Europe towards growth - hopefully democratically, not by Meltdowns.
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CH R May 14, 2017

I agree with the newd to invest in infrastructure- it's really gotten quite bad in the last decades, education could also need more money - and IT would be well spent.

What about a policy that fabors getting more children? That would probably alleviate the need for saving for retirement and at the same time foster spending for consumption.
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Walter Gingery May 13, 2017

Surplus countries like Germany don’t suffer from insufficient savings. They suffer from insufficient domestic demand, and this almost always means insufficient consumption.

Exports – Imports = Savings – Investment

Any country that saves more than it invests also by definition produces more goods and services than it can absorb domestically, and so it must export the excess production.
That is why a country’s current account and its capital account (which includes changes in central bank reserves) must always balance to zero.

Germany provides an example of this paradox. The Hartz labor reforms of 2003–05 had the impact of a tax increase on workers and a cut in corporate taxes, effectively redistributing income from high-consuming workers, in the form of a decline in wage growth, to non-consuming businesses, in the form of higher profits.
The higher savings did not translate into higher investment, however. In fact, domestic investment in Germany actually declined, perhaps because weaker consumption growth reduced desired investment levels.
- Karen Williams May 15, 2017
  
  Walter, I believe you are absolutely right.
  
  This is the same thing Professor Michael Pettis has been saying about China, where apparently the percent of national income enjoyed by households has for quite a while been significantly lower than it’s ever been in any country throughout history. Less than 40%. Very few Chinese consumers can afford to buy the things they make, that’s why China has been selling more goods than it buys abroad. Not because they are more frugal than consumers in trade-deficit countries.
  
  He says if a country has a persistent trade surplus you will find that for whatever reason - usually government policies - the share of total national income going into the pockets of consumers is lower than in other countries. And I suppose I would add, based on the U.S. experience, their borrowing opportunities are also not substantially greater than in other countries.
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- Steve Hurst May 13, 2017
  
  Walter
  
  Thank you for the information Walter.
  Fruits can be a bitter harvest.
  The euro is running around like a demented Johnny Appleseed and nobody appears to know how to stop it
  
  Are we looking at corporatism at play or are we looking a capitalist insecurity and lack of investment opportunity
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- Walter Gingery May 13, 2017
  
  ". . . fruits of economic gains. . ." should be ". . . gains in productivity. . ."
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- Walter Gingery May 13, 2017
  
  "In our research, we examine the tradable manufacturing sector, the backbone that accounts for 80% of German exports. The competitiveness of this sector increased because firms increasingly relied on domestic suppliers, whose workers’ real wages started to fall in the mid-1990s. That decline in real wages was a direct result of the concessions that workers made to companies in response to the new competitive challenges at the time. In addition, productivity increases in the sector outpaced wage increases. Our research shows that changes in contracts between firms and their workers were central to the process of improving the competitiveness of German industry.
  
  "With good reason, the rise in wage inequality has led to an intensive debate about its social consequences and its effects on poverty and social justice. “Inclusive growth” is now high on the federal policy agenda, not only in Germany but in other countries as well. In 2015, for example, the German government introduced a nationally legislated minimum wage."
  
  NATIONAL COMPETITIVENESS
  The Real Reason the German Labor Market Is Booming
  Alexandra Spitz-Oener
  MARCH 13, 2017
  The Harvard Business Review
  
  Also this, from the Bertelsmann Stiftung:
  
  The German economy is as strong as ever. Nonetheless, the inequalities between specific groups, generations and regions are growing. As a business location, Germany needs an agenda for inclusive growth that enables everyone to tap their potential and generates greater investment in our future.
  
  Compared with many of its European partners, Germany is doing well economically. But a narrow focus on economic growth alone is misleading, as the growth of recent years has not been inclusive.
  
  In fact, inequalities across social groups and regions are growing, which has a corrosive effect on societal cohesion. At the same time, we are currently living at the expense of future generations.
  
  Our living standards are undermining future generations’ opportunities and potential. And the budgetary cuts needed make it all the more difficult to invest in promising growth areas.
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- Walter Gingery May 13, 2017
  
  Steve,
  
  While I agree with your analysis in general, I suspect that German workers are less and less content with an arrangement where the lion's share of the fruits of economic gains are distributed to companies. (I couldn't locate it, but I recall a recent post on P.S. by a German suggesting that German labor unions are growing restless.)
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- Steve Hurst May 13, 2017
  
  Walter
  
  If the currency you are using is undervalued by - to pick a figure - 20% - everyday is a sale day. Exports can therefore be expected to grow and unless commensurate domestic consumption of the same volume rises by something related to the 20% advantage driven exports an imbalance will follow. I would have expected domestic consumption on par with exports volumes rising under these circumstances would be extraordinary. With an undervalued currency Germany does not have to be efficient just so-so to enormously benefit
  
  If I was a German worker I can see no reason why I would lobby for this to stop. The only question is when the party has to stop and it can only be stopped by other EZ members who face a slow or fast catastrophy and so far have opted for a slow burn
  
  The EU default response procrastination, in part because of democratic deficit in its structure
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Michael Parsons May 13, 2017

"The correspondence of savings minus investment with exports minus imports is not an economic theory; it’s an accounting identity."- but only if the GDP is static, for if the unspent income (S) is not spent in real investment(I), then out put will fall unless foreign purchasers or higher government spending (G) can be found.. The articles assertion is a starting point for nalysis, not an identity.
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Iain Wicking May 13, 2017

Firstly economists have zero idea how 'economic wealth' is created. Secondly, Germany has a strong balance of payment because they have a 'COMPETITIVE' economy. The explanation given in the article is idiotic and it is no wonder economists have no idea how to explain the decline of the us economy.
- Steve Hurst May 13, 2017
  
  Iain
  
  The German economy may be competitive but that is not the issue. It is subsidised by the eurozone as previously detailed in an article on Project Syn
  
  https://www.project-syndicate.org/commentary/trump-germany-currency-manipulation-charge-by-hans-werner-sinn-2017-03
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Steve Hurst May 12, 2017

Eurozone talks underway -
https://www.youtube.com/watch?v=5M3tz7Mv2jQ
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Peter Schaeffer May 12, 2017

Apparently some folks don't know this but Barry Eichengreen is the author of "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939" which I have read. The author clearly shows how the Gold Standard contributed (deeply) to the Great Depression and prevented effective responses to the Great Depression for years.

However, the reader is now expected to ignore all of that wisdom (and it is wisdom) and embrace the Euro even though the Euro has malignly acted as the Gold Standard of our time.

This is a tragic folly to say the least. Why does Barray cling to the lunacy of the Euro while recognizing the problems of the Gold Standard? Not hard to answer. The Euro is PC and the Gold Standard (these days) is not. Of course, the Gold Standard was very PC in it days. Good liberals, cosmopolitans, internationalists, etc. all supported the Gold Standard. They were wrong then and they are wrong now.

Back in 2007, Barry wrote a paper about the Euro, "The Breakup of the Euro Area"

Of course, Barry recognizes that the Euro is first and foremost a political, not economic project. Quote

"But for influential political elites, political integration remains a valued goal."

and then we have the typical (extreme) ignorance on immigration. Quote

"Among other things this may mean
limiting labor mobility from North Africa and the Middle East, regions where earnings
differentials vis-à-vis the EU are large and the efficiency effects of freer labor mobility
would be especially pronounced."

The "efficiency effects of freer labor mobility"? Presumably the women of Cologne or the family of Maria Ladenburger understand how important "efficiency effects" really are.
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M M May 12, 2017

One must be thankful that the majority of people are not stupid. The majority of the commentators on this article on PS and in the meanstream media, have said it all. So the author must go back to the drawing board.
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M M May 12, 2017

This article is all about denial and nothing but denials. The latest German data was released today, trade balances or inbalances in a flawed and discriminatory system that has been hijacked and held to ransom by Bandits And Gangsters can never be called strength, it is called " Broad Daylight Robbery" and nothing but.
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Michael Public May 12, 2017

I think you are naive to think mercantilism was discredited. What was discredited was mercantilism 1.0. China has effectively used mercantilism 2.0 to go from a peasant nation with millions starving (1960's) to the World's largest economy (on PPP).
- Jan Czaja May 12, 2017
  
  Thank you very much. Last time I checked, China didn't lift those million out of poverty by running deficits. If that was the case, entire Africa would be at the same level of development, but it's not. Mercantilism is alive and doing well.
  
  Also "world economy in which investment is in short supply, as evidenced by record-low interest rates"...wouldn't the opposite be the case. The interest rates are low because the developed world is awash with liquidity, all chasing a reasonable rate of return and rarely finding it. At least, that's the case in USA. There's plenty of liquidity. Just checkout the balance sheets of Apple, Google, etc. If those guys are hoarding cash, it probably means that they haven't found something reasonable justifying the investment.
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Steve Hurst May 11, 2017

I fail to see how a short term binge by Germany solves a deep and ever present structural problem in the euro.

By the way there are other countries in the West that have a similar demographic to Germany's but dont have Germany's savings. So is Germany's saving spree demographic driven by demographics or something else, like having spare cash. Yup, that may have something to do with it.

Hmm could it be cultural. That would be interesting, a totally different individual culture attempting to establish a closer together union with totally different cultures. No it can't be that becasue that would never work and they all say they are trying to make it work. I guess it would mean others having to adopt that cultural behaviour for it to work. But hey that would a tad difficult if they dont have the same euro driven gain it would just sort of collapse into austerity which is sort of saving when you dont have any money. That woulod be totally illogical.

I always hum There's a hole in my bucket dear Liza when I read an article like this. It just comes to mind, I dont know why.

Why should Germnany be bothered about getting out of Trump's sights. I dunno, they are hiding behind the whole of the EZ and Mr Trump sure can't blacklist the whole EZ. Why should Germany want to solve the whole World's economy by blowing it's savings. I didnt know one country blowing it's savings could save a whole EU of 28 members let alone the World

'...Germany ... abandoning the euro and letting its currency appreciate – makes little sense'. Indeed, their prospect of future savings would evaporate like a snowball in Hell along with their trade surplus. The Germans must thank the French every day for this great device that the French forced on them as the deal for reunification. Perhaps the French idea was to access German assets, after all that was the root of the EU/EEC/post ww2 coal thingy. Maybe the Macron idea is still the same ol' French idea, lets access German assets. Hey if I was a German that would sort of worry me, I might insist on things that other people would find difficult.

Now where is Henry, has he sharpened that axe yet. No, he's saying there is a hole in his buckets. That fella has a load of buckets. He calls one Greece, one Italy, one ... Oh never mind he's in double figures of buckets.
- M M May 12, 2017
  
  Steve, it is called "Hoarding" or the Schäuble Syndrome!
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Gerald Silverberg May 11, 2017

The aging argument is something of a canard. Why should Germans want to accumulate assets in foreign countries that are aging even faster than she is, like Greece, Italy, and Spain, with which she runs trade surpluses? Their populations will be even less able to service the resulting debts than if those Germans had invested in their own country.
A better explanation is that real wage growth lags productivity growth, and thus consumption growth is too modest, discouraging domestic investment and putting too much income in the hands of the rich and the business sector, who invest it abroad rather than consuming or investing it domestically.
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sincerely xd May 11, 2017

"Germany has a high savings rate for good reason. Its population is aging more rapidly ", false. Germans save since they are young, is more an habit. and.."there are exactly zero German universities in the top 50 globally. More public funds would make a difference" FALSE, if none university is there is because these list is made in engleish countries
- Michael Pettis May 28, 2017
  
  Actually the most widely used list is made by a Chinese university, and it pretty much confirms the others.
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Peter Schaeffer May 11, 2017

I found the following comment online. By Stan Sorscher.

"In the real world, economists in the mercantilist country smile and thank their lucky stars that they did not take economics degrees in the US."
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Peter Schaeffer May 11, 2017

"The correspondence of savings minus investment with exports minus imports is not an economic theory; it’s an accounting identity. Germans collectively spend less than they produce, and the difference necessarily shows up as net exports. "

Touchingly naive. Accounting identifies are real. However, they don't reveal much. It is true that (S)avings - in(V)estment must be equal to (E)xports - (I)mports. However, that tells you nothing about whether S-V drives E-I or the other way around.

A trivial example should show this. The peak U.S. trade surplus (post-WWII) was in 1947. Did the U.S. saving rate somehow magically jump? Or did the U.S. enjoy a temporary export boom (driven by European reconstruction).

The author is basically arguing that an increase in corporate profits makes corporate sales go up. Obviously, causality goes the other way.
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Paul Friesen May 11, 2017

Good article. More public sector spending by Germany, which can well afford it, would help the whole E.U. get out of its long recession. The whole continent desperately needs more demand to end unemployment, and while Germany itself is not suffering much from that, it could certainly do more to help those that are.
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Peter Schaeffer May 11, 2017

"It underpins the doctrine known as mercantilism, which comprises a hoary set of beliefs discredited more than two centuries ago. "

Not quite. The successful nations of Asia (and the world) are quite mercantilist. The global losers talk about how "mercantilism is dead". Who should you believe? The winners or the losers? The U.S. was notably mercantilist from the founding until around 1970. It was also notably successful. Since 1970/1980 American has abandoned mercantilism. Surprise, surprise, it has also abandoned success.
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