A Tale of Two Countries
The great thing about Accounting Identities is that they must be true.
The bad thing about Accounting Identities is that their truth is often trivial.
Tim Duy notes the reality: We can’t all be net exporters
The Greek crisis…is a reminder that global imbalances are still with us – and, if not corrected, will eventually threaten the sustainability of the global recovery. Indeed, how sustainable can any recovery be if the vast majority of nations are pursuing an export oriented growth strategy? After all, clearly that is not a game all can play – there needs to be a net importer to offset the net exports. Who wants to fill that role? If the US is pushed into filling that role, we have simply come full circle over the past three years.
There is an obvious nominee, as D-Squared noted today:
If you put Oliver Wendell Holmes (“the First Amendment does not protect the right to shout ‘fire’ in a crowded theatre”) and JM Keynes (describing Treasury anti-inflation policy in the 30s as “crying ‘fire, fire’ in Noah’s flood”) together, does that mean that German politicians talking about the inflationary consequences of a Greek bailout are shouting “Fire!” in a flooded theatre?
And follows that by telling the truth and shaming the Devil:
[T]he main issue the ratings agencies have is the Greek pension liability, and the main component of the austerity measures will end up being a reform of the pension system. The sovereign bond market is a curious place, where “He’s willing to cheat his own grandmother, that one”, can be a mark of the utmost probity.
One of these days, economists will admit that it’s life-cycle theory, not just Modigliani-Miller, that has destroyed the profession’s foundations. Apparently, planning for the future and accepting deferred compensation is A Bad Idea.
What exactly do life-cycle theory and Modigliani-Miller undermine?
The US abandoned its export strategy mostly because of the need to bolster strategic areas against Communism and Soviet influence. Rebuilding West Germany and Japan for starters,(who yes we exported to initially post WW2, but eventually opened our markets wide open for), the East Asian tigers.
Obama’s export initiative would fundamentally reshape global geopolitics and the world economy if he actually followed through with it. He probably won’t because it would create instability in a lot of places at a time when the world economy is weak, he just doesn’t like to shake things up, and the US has become dominated by financial interests.
But if the US consumer is incapable of being the glutton of last resort, realignments might happen anyway.
What has Germany got to do with the Euro and the PIIGS debt crises?
Is the Euro a tool for conquest?
Being a net exporter (within the same currency is oddly gameable) means you need to “worry” about the clients’ fortunes. If you persist to keep the thing going.
Germany seems to have interpretted that as colonizing their importers. Tell Greece to get poor is not much different than conquering Poland.
Whilethe English, French and Spaniards were creating military tattoos in Holland the Germans were quietly running the rest of Europe in the shape of the Holy Roman Empire and Hapsburg Austria.
The Germans have a history of running ecerything in Europe east of the Somme and they intend to keep it going.
Should the world ally to stop this monetary Liebensraum?
How come industrial Pa is not concerned about Ala poverty?
I suppose because the US monetary authority does not care for Pa’s wishes, where as in Euro zone the Germans can use it for national advantage.
Net importers are apt to be colonies of their suppliers, and someday the overlords will demand control.
Oh you heroes, defending your fraudster comrades in Greece against those evil current account surplus nations.