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Ben Attacks Germany’S Trade Surplus

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http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03-germany-trade-surplus-problem

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. In 2014, Germany’s trade surplus was about $250 billion (in dollar terms), or almost 7 percent of the country’s GDP. That continues an upward trend that’s been going on at least since 2000 (see below).

In a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem. Several other members of the euro zone are in deep recession, with high unemployment and with no “fiscal space” (meaning that their fiscal situations don’t allow them to raise spending or cut taxes as a way of stimulating domestic demand). Despite signs of recovery in the United States, growth is also generally slow outside the euro zone. The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits.

Persistent imbalances within the euro zone are also unhealthy, as they lead to financial imbalances as well as to unbalanced growth. Ideally, declines in wages in other euro-zone countries, relative to German wages, would reduce relative production costs and increase competitiveness. And progress has been made on that front. But with euro-zone inflation well under the European Central Bank’s target of “below but close to 2 percent,” achieving the necessary reduction in relative costs would probably require sustained deflation in nominal wages outside Germany—likely a long and painful process involving extended high unemployment.

040315_Trade_Surpluses.PNG?h=311&w=600&l

I hope participants in the Washington meetings this spring will recognize that global imbalances are not only a Chinese and American issue.

Ooo goody. Things are hotting up!

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Dear Germany will you stop producing higher quality goods and produce some expensive shit, thanks. Signed talking head for pretty much eveything that is wrong modern finance and economics in the US. A paid bullshitter and liar, meddler, ponzi finacier and manipulator of markets and a frontman bitch for whichever politico is in power..

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Dear Germany will you stop producing higher quality goods and produce some expensive shit, thanks. Signed talking head for pretty much eveything that is wrong modern finance and economics in the US. A paid bullshitter and liar, meddler, ponzi finacier and manipulator of markets and a frontman bitch for whichever politico is in power..

Except he specifically says it has nothing to do with producing quality goods and everything to do with intentionally running a 7% trade surplus. i.e. stealing demand from the rest of the world. If they persist theyre going to get a slap.

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Ben will know what he's talking about of course seeing as his like have nothing at all to do with the economic crisis.

Well Deutsche bank were one of the biggest sources of demand & supply for all that sliced and diced crap.

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Except he specifically says it has nothing to do with producing quality goods and everything to do with intentionally running a 7% trade surplus. i.e. stealing demand from the rest of the world. If they persist theyre going to get a slap.

Err the whole point of doing anything productive is doing it better than your competition and earn the benefit accordingly, which means positive trade flows. ******** economics is the oppostie of this process which is what Ben Bunkum is proposing. IF eveybody in the world follow his model then banks control all as all would be in debt. That is what this shyster wants and also not for his and his controller's mismanagement being found out, lest his countrymen become somewhat upset at being sold down the river.

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Well Deutsche bank were one of the biggest sources of demand & supply for all that sliced and diced crap.

Quite likely - the stuff that they're aware of, can actually allocate and know what belongs to who. Maybe they should do what he suggests but a 2nd and 3rd opinion would seem very wise to say the least.

It all sounds very suck it and see.

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Quite likely - the stuff that they're aware of, can actually allocate and know what belongs to who. Maybe they should do what he suggests but a 2nd and 3rd opinion would seem very wise to say the least.

It all sounds very suck it and see.

Polite warning short across the bows from a retired academic ahead of g20. Theyll roll out the big guns later.

Pretty straightforward advice - Raise wages, increase inflation & domestic demand and/or invest in infrastructure. Same sort of thing Varoufakis has been urging or Pettis for that matter.

US can just sit back and let Merkel play with Putin at the end of the day though if they choose to.

Edited by R K

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So will the world be a better place, if Germany reduces the manufacture and export of machine tools and other high tech engineering?

I don't think that's rk's point.

Germany are saving up their gains from said exports and lending them out to other countries under the auspices of helping their economies, but in reality they're just perpetuating deficits in these other countries using their political clout and the false promise that it will be good for them, as a stick and a carrot. It's not a free market, they've deliberately signed up politically weaker countries as the cosignatories of their surplus, as the assumption was that the euro experiment was a magnanimous venture, so the deficit countries were and are being hoodwinked.

Germany COULD either lend their surplus too countries not politically affiliated to the EU, and probably get a much lower rate of return on them, or instead spend it on themselves. But they're choosing the non market option instead, forcing deflation on the others.

Edited by Si1

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This is why the whole thing will eventually go tits. You can't just cry and say it's not fair and expect other countries to play along to bail you out of your self inflicted ponzi.

The countries that thought they could borrow their way to prosperity are going to be in for a shock.

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This is why the whole thing will eventually go tits. You can't just cry and say it's not fair and expect other countries to play along to bail you out of your self inflicted ponzi.

The countries that thought they could borrow their way to prosperity are going to be in for a shock.

As are the countries that lent them the money. Takes two to tango.

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As are the countries that lent them the money. Takes two to tango.

I agree the money can't be paid back.

We are living in interesting times.

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I agree the money can't be paid back.

We are living in interesting times.

Fair play mate

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Polite warning short across the bows from a retired academic ahead of g20. Theyll roll out the big guns later.

Pretty straightforward advice - Raise wages, increase inflation & domestic demand and/or invest in infrastructure. Same sort of thing Varoufakis has been urging or Pettis for that matter.

US can just sit back and let Merkel play with Putin at the end of the day though if they choose to.

Ok but in terms of overall actual consequences I don't think they have a clue what they're doing. They've proved that far too often. Apart from lining their own pockets that is.

Edited by billybong

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http://globaleconomicanalysis.blogspot.co.uk/2015/04/thrown-under-bus-another-look-at-self.html

I asked Bernanke about Fed-sponsored bubbles, inflation as measured by the CPI while ignoring assets especially in housing (see charts in the above link), and whether or not the Fed had any culpability for what had happened.

I was 99% sure in advance my questions and comments would be deleted. They were twice.

Instead of posting serious comments and questions, the Brookings institute fawned all over Bernanke by posting numerous glowing appraisals, thanks, and other trivia.

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Billybong, Brookings, what a joke, a sick fawning one.

None of bernankes excuses are frankly really worth reading anyway. So polluted is the mindeset and past actions of now a string of fed heads.

Edited by onlyme2

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http://globaleconomi...ok-at-self.html

I asked Bernanke about Fed-sponsored bubbles, inflation as measured by the CPI while ignoring assets especially in housing (see charts in the above link), and whether or not the Fed had any culpability for what had happened.

I was 99% sure in advance my questions and comments would be deleted. They were twice.

Instead of posting serious comments and questions, the Brookings institute fawned all over Bernanke by posting numerous glowing appraisals, thanks, and other trivia.

I thought something was strange with the comments the other day when RK posted it, and he wholly backed his well written wholly biased story which failed to mention QE in relation to why interest rates are low.

http://www.housepricecrash.co.uk/forum/index.php?/topic/192346-the-big-fed-thread/?p=1102694220

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Except he specifically says it has nothing to do with producing quality goods and everything to do with intentionally running a 7% trade surplus. i.e. stealing demand from the rest of the world. If they persist theyre going to get a slap.

bit of both i think.

yes,germany produces good quality stuff.

yes, germany(and certain cohorts) have been engaged in a bit of industrial/educational sabotage to make everybody elses stuff sh1t by comparison.

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I thought something was strange with the comments the other day when RK posted it, and he wholly backed his well written wholly biased story which failed to mention QE in relation to why interest rates are low.

http://www.housepricecrash.co.uk/forum/index.php?/topic/192346-the-big-fed-thread/?p=1102694220

The dear old yanks have been down this road before. Here is an extract from Bush senior's ill fated trade mission to Japan in 1992

"We can always buy more parts," a senior Nissan official said. "But that does not address the basic problem of how American cars can compete against Japanese cars, or American parts against Japanese parts." And until those problems are solved, he said, American industry "will not truly recover." An Outspoken Approach

We cannot lower the quality of our cars," said Nobuhiko Kawamoto, the president of the Honda Motor Company. "So to achieve the goals in the plan, we need to request the cooperation of American producers."

I am running around in a loan brand new Jeep Cherokee waiting for my new Alfa. It is a £36000 grand car and has a coarse engine, poorly fitting panels and a badly handling chassis. My Audi Q3, and Volkswagen Up are light years ahead as was the 4 year old Alfa hence me getting another one.

The US with some rare exceptions makes dreadful cars 10 years behind Euro and Japanese styling and technology

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Werner Nails it.

Listen from 1.16 onwards. Germany has a sounder banking system, dominated by local non profit banks that are investing in positive, productive investments.

Whereas, Bernanke is pushing the intersts for the too big to fail banking monsters who have everything to gain by manipulating the economy to their ends in the shortedt time possible, including raiding the taxpayer for money when they fail.

No wonder is he is scared of germany (or any other country that follows such a path) as in the end they win and the US will fail.

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Given that US GDP growth is once again threatening to turn negative (currently 0.0% according to the Atlanta Fed) and that demand for US manufacturers' consumer goods is back where it was in 2008 (i.e. in steep decline) the German govt might with equal legitimacy question the American 'recovery' strategy.

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Well, at least he has noticed. I think he is wrong in the detail of his remedies though probably because he is more interested in the USA's postion than anything else and like most Yanks they are instinctively against 'socialist' redistribution policies preferring more of a 'trickle down' from Germany effect.

He floats the idea of reflation in Germany to solve the problems of Germany's chronic trade surplus.

I think whilst that may be right, we actually need to break the problem down into 2 parts. The internal trade surplus within the Eurozone and the external trade surplus of the Eurozone.

Starting with the former, I agree with PragCap (below).

The problem with a reflation of Germany solution is that it can paper over the cracks of what are the true fundamental problems. By resolving the internal problems with fiscal transfers may actually allow the Euro to strengthen and the peripheral aras to suck in more imports from outside the Eurozone. A far better long term solution.

http://www.pragcap.com/three-things-i-think-i-think-35

Both problems are caused by germany. Its reasonable for Bernanke to be more concerned by germanys position vis a vis global trade imbalances but the solutions are similar in both cases - germany is cheating not only US & others (and her own workers) but also her own EZ partners. Running higher inflation or increasing german workers wages or infrastructure investment helps resolve both problems, but I also agree they need a better system of transfer payments.

My preference would still be for the EZ to kick germany out cause I dont think she has any intention of playing fairly, ever.

At some point germany will come unstuck and when she looks around for help everyone will look the other way and rightly so.

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