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4 Comments
  1. Positroll says

    2 stupid questions from a non-economist:
    1) How do millions of German tourists spending money in Spain come into the equation –
    as German or Spanish consumption?
    2) How do tons of Germans buying holiday homes in Spain come into the equation?
     
    Remark: the problem is that German industry competes mostly not with Spain, but rather with China (which is manipulating its exchange rate) and the US (which is printing lots of money to devalue its currency). How will Europe be better off  (esp. the Netherlands, Austria, Slovakia, Poland and others that are part of the German supply chain) if Germany becomes just as uncompetetive as the PIGS?

    1. Crake says

      On “US (which is printing lots of money to devalue its currency). “, how is the US printing money? I assume you mean by quantitative easing. I do not understand how that is printing money. QE is basically switching bank reserves for bonds. If banks are not loaning those increased reserves, which they are not, there is no increase to money supply. Also, since banks are not reserve constrained, increased reserves does not even imply potential increase to money supply because banks could increase loans with or without those increases to reserves. Therefore QE is not printing money in my opinion. Do you disagree or did you mean something else?

  2. Positroll says

    2 stupid questions from a non-economist:
    1) How do millions of German tourists spending money in Spain come into the equation –
    as German or Spanish consumption?
    2) How do tons of Germans buying holiday homes in Spain come into the equation?
     
    Remark: the problem is that German industry competes mostly not with Spain, but rather with China (which is manipulating its exchange rate) and the US (which is printing lots of money to devalue its currency). How will Europe be better off  (esp. the Netherlands, Austria, Slovakia, Poland and others that are part of the German supply chain) if Germany becomes just as uncompetetive as the PIGS?

  3. Panayotis Economopoulos says

    Good article! You must also realize that Greeks work longer, vacate shorter and get payed much less than Germans!

  4. Crake says

    I have two questions.

    One, trade is not one way- it is a voluntary exchange between nations. Maybe I read it wrong, but from your post, I see an implied assumption that a nation can determine its trade account on its own via its consumption and production actions. But it takes two to tango. A nation can not run net-exports unless the foreign sectors wants to consume more of that nation’s products than it sells to that nation. If the foreign sector wants to save and sell more goods to nation than it exports from that nation, such as the policy decision China entertains to many nations, then that nation’s actions alone cannot change that it will run net-import can it? Or by currency rates do you account for that two party interaction? If so, how do you deal with nations that actively trade their and their trading partners’ currencies to keep a net-export focus? It seems, it still cannot be done by one nation alone to me. Am I wrong on this?

    Two, maybe I missed it but I see only two sectors covered in your analysis – domestic and foreign. What about the government sector? Sectoral balance holds that the domestic account + foreign account + government account = 0 So, the government account is going to be the opposite of the domestic account plus the foreign account. So both the foreign account and the domestic account can run surpluses (savings) equal to the governments deficits. I take from your post an implication that both cannot run surpluses. Do you agree or disagree that a nation’s economy can both save and have a net-import condition equal to its government’s deficit?

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