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03/04/ · Germany’s trade surplus is a problem. Ben S. Bernanke Friday, April 3, Ben Bernanke. In a few weeks, the International Monetary Fund and Estimated Reading Time: 10 mins. 13/04/ · In a slow-growing world that is short of aggregate demand, Germany’s trade surplus is a major problem. Several other members of the euro zone are in deep recession, with high unemployment and with no “fiscal space” (meaning that their constrained fiscal situations in the eurozone system does not allow them to raise spending or cut taxes as a way of stimulating domestic demand). 16/08/ · Trade surpluses or deficits are much more important than the potential “productivity effects” of a liberalization of trade in general. Germany, with its wage dumping in the first years of the EMU, violated the implicit rules underlying close monetary cooperation among nations, required by Estimated Reading Time: 11 mins. 05/08/ · Bernanke also suggests Germany’s trade surplus would have been lower if Germany had its own currency, which would presumably now be stronger than the euro against other currencies. But take a look at Switzerland, where the trade balance has grown in the face of a first stable, then strengthening, Swiss pilotenkueche.deted Reading Time: 8 mins.

In a few weeks, the International Monetary Fund and other international groups, such as the G20, will meet in Washington. When I attended such international meetings as Fed chairman, delegates discussed at length the issue of „global imbalances“ – the fact that some countries had large trade surpluses exports much greater than imports and others the United States in particular had large trade deficits. China, which kept its exchange rate undervalued to promote exports, came in for particular criticism for its large and persistent trade surpluses, Ben S.

Bernanke wrote for Seeking Alpha. However, in recent years China has been working to reduce its dependence on exports and its trade surplus has declined accordingly. The distinction of having the largest trade surplus, both in absolute terms and relative to GDP, is shifting to Germany. That continues an upward trend that’s been going on at least since Why is Germany’s trade surplus so large?

Undoubtedly, Germany makes good products that foreigners want to buy. For that reason, many point to the trade surplus as a sign of economic success. But other countries make good products without running such large surpluses. There are two more important reasons for Germany’s trade surplus.

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In the popular discussion of economics, in the media for example, some things are always assumed to be good and some are assumed to be bad. So trade surpluses are always good and deficits are always bad. Export are good and imports are not so good. Government budget surpluses are good and budget deficits are bad. If a country, such as Germany, is exporting a lot and running a big trade surplus then that is seen as an indicator of economic virtue, as economically healthy and as something that others should emulate.

Running a big, and persistent, trade surplus is actually the sign of an unbalanced economy and it can cause all sorts of problems. If a country has an economy that is in balance then it should consume and invest the same amount as it produces. If it consumes and invests less than it produces then there will be excess production, unsold goods, businesses will contract and the economy will shrink until consumption plus investment once again equals production.

A country like Germany that consumes and invests less than it makes can export the surplus goods and thus avoid economic contraction but that just exports the problem to another country because in order to sell more more goods than it imports some other country or countries have to be running a matching deficit, they have to be consuming and investing more than they are producing. How all that works is explained in more detail in two articles I have just posted on this website — you can see them by clicking here.

In the last decade and half the world has seen some very, very large trade imbalances develop. These imbalances have involved some countries, such as the USA and the peripheral countries of the eurozone, running very big deficits and some countries, notably China and Germany, running really big surpluses.

germany trade surplus problem

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Germany routinely comes under fire for its massive trade surplus. Since the financial crisis, the size of the German surplus has raised hackles around the world, and it remains a topic of concern at the International Monetary Fund and other global institutions. By suggesting that Germany cannot do anything about its current-account balance, the Scientific Advisory Council of the Federal Ministry for Economic Affairs and Energy is not offering sound advice.

The current-account balance reflects the difference between exports and imports. To reduce its massive surplus, Germany can either reduce its exports or increase its imports or do both at the same time. For example, an expansion of imports can be achieved relatively easily through increased public investment. Investments typically induce higher imports.

Building new roads, for example, usually requires additional construction machinery. This, in turn, requires additional intermediate inputs, which must be imported. Moreover, 30 to 40 cent of every additional euro the German government allocates toward public investment is spent on imports.

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Publicar un comentario. Cientificos Indice. In a few weeks, the International Monetary Fund and other international groups, such as the G20, will meet in Washington. My recent post discusses the implications of global imbalances from a savings and investment perspective. China, which kept its exchange rate undervalued to promote exports, came in for particular criticism for its large and persistent trade surpluses.

However, in recent years China has been working to reduce its dependence on exports and its trade surplus has declined accordingly. The distinction of having the largest trade surplus, both in absolute terms and relative to GDP, is shifting to Germany. Undoubtedly, Germany makes good products that foreigners want to buy. For that reason, many point to the trade surplus as a sign of economic success. But other countries make good products without running such large surpluses.

First, although the euro—the currency that Germany shares with 18 other countries—may or may not be at the right level for all 19 euro-zone countries as a group, it is too weak given German wages and production costs to be consistent with balanced German trade. Since then, the euro has fallen by an additional 20 percent relative to the dollar. The comparatively weak euro is an underappreciated benefit to Germany of its participation in the currency union.

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Hong Kong solution to balance of payments problems was not to collect any statistics on them prior to John Cowperthwaite, Hong Kong’s famous financial secretary in the s refused to collect economic statistics on the grounds that he might be expected them to do something about them. His advice to any developing country was to abolish its office of National statistics as the first step to removing barriers to economic development.

Statistics are the eyes and ears of regulators, bureaucrats, meddling politicians and worrywarts. The EMU trade balance is massively distorted by the Netherlands. A large volume of Germany’s global non EMU imports come through the Dutch tollgate and appear in the stats as EMU imports to Germany when they are no such thing. This mislabelling deflates the eurozone trade imbalances and inflates the extra EMU imbalances. If you want to know how Germany’s surplus has declined with the Southern rim and France you have to look at individual the individual trade balances.

You will find that Germany is still extracting big surpluses from this region and that Bernanke is right on the money While what you say about the Netherlands is interesting, is there any reason to believe that this has changed in the past 10 years? Is this what has caused the divergence I report in my last graph? I thought it was pretty much accepted as fact and well-established that stronger currencies hurt exports and weaker currencies help exports.

You’re going to have to do more than show one chart about Switzerland to challenge that consensus.

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GoldSeek Web. By John Mauldin In Code Red I wrote a great deal about trade imbalances among the various European countries, which were at the heart of the European sovereign debt problem. As the peripheral countries have tried to rebalance their trade deficits with Northern Europe and especially with Germany, they have seen their relative wages fall and deflation become a problem.

Greece is the poster child. The north-south imbalance in the Eurozone is still a problem today. He first published his blog on March 30, and it appears he is going to post to three times a week. His ongoing debate with Larry Summers over secular stagnation is fascinating, although I think they both miss the point on structural growth. Monetary policy and fiscal policy lag behind other drivers of growth in terms of importance.

That fact was brought home to me at lunch today, when Woody Brock met me over at Ocean Prime for some fish and wisdom. Woody is simply one of the smartest economists on the planet and knows the gamut of the literature as well as anyone. Everyone responds to incentives, no matter what the country or type of government.

Setting incentives to maximize entrepreneurial activity will produce the most growth and jobs.

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Besides “ congrats ,“ this was the message Monday to French President-elect Emmanuel Macron from Martin Schulz, Germany’s Social Democratic candidate for chancellor. Our exports are the result of good work done here in the country. The message followed Macron’s French election win Sunday and, on the same day, the crushing defeat suffered by Schulz’s SPD in a regional election. In a one-hour speech Monday, the campaign’s first glimpse of his economic policy, Schulz argued that this criticism was „wrong.

The party enjoyed an unprecedented spike in polls after declaring that the former European Parliament president would run as their candidate. Ahead of the second round of the French presidential election, both Merkel and Schulz embraced Macron as the most reliable partner for Berlin. Accordingly, both Merkel and Schulz hailed Macron’s victory over far-right candidate Marine Le Pen. However, they are well aware that things will be far from easy.

In general, prosperous Germany, where 95 percent of the population support further European integration, is among the most Europhile countries in the EU. A majority of Germans oppose debt cuts for crisis-ridden Greece, for example. A key part of his strategy appears to be the argument that Germany’s wealth is intrinsically linked to the well-being of the European Union. UK Trade Secretary Liz Truss is beloved of Tory Party members — but things are about to get tougher.

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In , Germany’s trade surplus was about $ billion, or almost 7 percent of the country’s GDP. That continues an upward trend that’s been going on at least since Economic Success. 05/04/ · The distinction of having the largest trade surplus, both in absolute terms and relative to GDP, is shifting to Germany. In , Germany’s trade surplus .

In a few weeks, the International Monetary Fund and other international groups, such as the G20, will meet in Washington. My recent post discusses the implications of global imbalances from a savings and investment perspective. China, which kept its exchange rate undervalued to promote exports, came in for particular criticism for its large and persistent trade surpluses. However, in recent years China has been working to reduce its dependence on exports and its trade surplus has declined accordingly.

The distinction of having the largest trade surplus, both in absolute terms and relative to GDP, is shifting to Germany. Undoubtedly, Germany makes good products that foreigners want to buy. For that reason, many point to the trade surplus as a sign of economic success. But other countries make good products without running such large surpluses.

First, although the euro—the currency that Germany shares with 18 other countries—may or may not be at the right level for all 19 euro-zone countries as a group, it is too weak given German wages and production costs to be consistent with balanced German trade. Since then, the euro has fallen by an additional 20 percent relative to the dollar. The comparatively weak euro is an underappreciated benefit to Germany of its participation in the currency union.

If Germany were still using the deutschemark, presumably the DM would be much stronger than the euro is today, reducing the cost advantage of German exports substantially.

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