Tuesday, Dec 30, 2008
Remind me again why the Euro is so strong?
New York Times: Germany Suffers as U.S. Buys Less From China
The United States, with its credit-driven economy, has long ensured that others, notably China, Germany and Japan, have been able to pile up trade surpluses. That dynamic has shifted, with Americans paring purchases at a ferocious rate. “As the American consumer now capitulates, the export bubble is the next to go,” the chairman of Morgan Stanley in Asia, Stephen Roach, said. “Export-led economies around the world are in for a very tough rebalancing.” There is a strong correlation between Chinese exports to the United States and German exports to China.
Posted by drewster @ 12:41 PM (595 views) Add Comment
7 Comments
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1. drewster said...
If you can't view the NYTimes link, there are open-access copies of the article here and here.
2. inbreda said...
yes - but surely they have trade surpluses to see them through the tough times - and the effect for UK/US is going to be a permanent devaluation of their currencies.
3. drewster said...
That sounds right to me, inbreda.
More importantly, if / when a recovery does come about, Germany will have thousands of skilled engineers, while Britain will have thousands of bankers and shop assistants. No prizes for guessing which country will do better.
4. bellwether said...
The surplus will be burnt through very quickly. If I recall the US hurt the most in the 1930's because it was in the China/Germany position. Overheads to run manufacturing are horrendous and once such business are destroyed reassembling is also expensive.
The number of engineers was justified by the massive increase in infrastructure which was ultimaltey fuelled by the consumer binge and by debt/ credit. It is all one system.
I don't see anything shameful about being good at banking and shopkeeping although I do regret we don't seem to be able to thrive in manfacturing - the UK temprament does not seem well suited to the precision and attention to detail required.
5. plato said...
We have yet to see the full economic impact on Germany.......yet to see the ECB loosen their grip on IRs....... yet to see eurozone banks' writedowns........yet to see the real impact of property price crashes around the eurozone........yet to see the eurozone job losses.......yet to see social unrest spread to a much greater degree in countries that are nowhere near as stable as the UK...... yet to see a whole host of factors already exposed and factored into the UK.......... and my favourite maxim........First the USA.......next the UK.......then the Rest.
Just some thoughts in general.
6. bellwether said...
Plato very fair comment on Euro
7. plato said...
bellwether
That was very general as I am by no means technically adept in economic matters. That is why I particularly like to read the posts of those that are on this site. I am pretty experienced in the art of games of chance though and this requires technical information combined with no small amount of intuition. At the end of the day the decision comes down to timing and as such have found it is less riskey to get out while you are ahead (the after-thought of which is : too early) and not go the max. There is always tomorrow and always a new set of challenges. It's important to remember the euro is no different to any other currency. Everything in life is a gamble.