tag:blogger.com,1999:blog-2546602206734889307.post33647835634603476..comments2024-03-19T09:54:37.187+00:00Comments on mainly macro: Was German undercutting deliberate?Mainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger61125tag:blogger.com,1999:blog-2546602206734889307.post-76609204530788374582015-12-14T14:46:15.784+00:002015-12-14T14:46:15.784+00:00Agreed, since money from export surplus is investe...Agreed, since money from export surplus is invested abroad. <br />But the advantage from undervalued currency in combination with this huge export surplus is still leaving a distinct smell.banananoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-24390743242557966052015-12-11T18:32:04.398+00:002015-12-11T18:32:04.398+00:00As I said, look it up
http://www.econlib.org/libr...As I said, look it up<br /><br />http://www.econlib.org/library/Enc/Mercantilism.html<br /><br />and then tell the world what's mercantilist in German policy. <br /><br />In school, German pupils are taught that mercantilism is unproductive and self-defeating.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56584072118772172152015-12-11T12:37:43.361+00:002015-12-11T12:37:43.361+00:00Sorry banana,
the irony is lost on you: We have t...Sorry banana,<br /><br />the irony is lost on you: We have the current surplus, because Germany is NOT mercantilistic. Internal devaluation is not an essential feature of mercantilism.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-4037631046259486112015-12-11T09:50:15.114+00:002015-12-11T09:50:15.114+00:00From a purely theoretical point of view, I cannot ...From a purely theoretical point of view, I cannot see the point of your objection. Lowering the NAIRU always lowers unemployment and increases GDP, regardless whether your are in a closed or in an open economy. The transmission channels may be different. <br /><br />From an empirical perspective, recall that there were also other forces at work that helped to improve German competitiveness vis-à-vis the rest of the Euro zone. <br /><br />In particular, EMU worked as a huge monetary stimulus for the periphery countries - implying lower unemployment and higher wage growth there - while it dampended activity in Germany - implying higher unemployment and lower wage growth in Germany. Indeed, implementation of the - extremely unpopular - labour market reforms in 2004 can be read as a direct reaction to rising unemployment. <br /><br />In addition, the German manufacturers are particularly specialized on capital-goods (cars, machinery). Car firms<br />such as VW had long-standing relations with and also production facilities in China. Therefore, German exports benefited more from the take-off in China then other Euro area countries. Carsten-Patrick Meierhttps://www.blogger.com/profile/10563466125226723276noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-35981360512120456332015-12-09T23:18:41.708+00:002015-12-09T23:18:41.708+00:00Mainly Macro5 December 2015 at 02:16
Does this me...Mainly Macro5 December 2015 at 02:16<br /><br />Does this mean that the Euro - in spite of Draghi's flood of QE - is too strong because of the Northern countries' export strength? So they should try to weaken its rate of exchange? The Americans will be delighted.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69268846388287310202015-12-09T21:21:12.927+00:002015-12-09T21:21:12.927+00:00I seriously doubt the last statement, considering ...I seriously doubt the last statement, considering this chart:<br />http://www.tradingeconomics.com/embed/?s=deuca2gdp&d1=19900101&d2=20151231&h=300&w=600&ref=/germany/current-account-to-gdp<br /><br />Leaving aside all the other implications of that assumption, a big part of those surpluses would have had to be soaked up by domestic demand to reach at least zero. <br /><br />Quite unlikely.banananoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-60944560693953007402015-12-09T20:53:04.473+00:002015-12-09T20:53:04.473+00:00Please tell me how the German economic policy (hug...Please tell me how the German economic policy (huge export surpluses, internal devaluation by wage moderation + basically undervalued currency) does not match the definition of mercantilism.banananoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-2863704355601302332015-12-09T10:57:04.646+00:002015-12-09T10:57:04.646+00:00banana,
You don't know much about mercantilis...banana,<br /><br />You don't know much about mercantilism, do you?<br /><br />Look it up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-3600619596660692092015-12-09T10:40:36.613+00:002015-12-09T10:40:36.613+00:00You don't understand SWL. He would say that wa...You don't understand SWL. He would say that was entirely beside the pointAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-7698869321945051872015-12-09T10:37:11.762+00:002015-12-09T10:37:11.762+00:00"German employers and employees connived in a..."German employers and employees connived in a policy that would take jobs away from their Eurozone partners." <br /><br />That is not correct. Wage moderation followed a broad change labour market and social security legislation. It was a deliberate policy - not intended at gaining a competitive edge over Eurozone partners but to correct inefficiencies in the social security system and to lower unemployment. <br /><br />I cannot see why increasing potential output by lowering the NAIRU should be a beggar-thy-neighbour policy in a monetary union. Indeed, it would also have worked to lower unemployment and to raise GDP if Germany was a closed economy!<br />Carsten-Patrick Meierhttps://www.blogger.com/profile/10563466125226723276noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-15442063863405975682015-12-09T10:36:42.180+00:002015-12-09T10:36:42.180+00:00Mainly Macro7 December 2015 at 09:00
You're q...Mainly Macro7 December 2015 at 09:00<br /><br />You're quite capable of a good rant yourself. <br /><br />In your time, you said German economic policy was based on greed or ignorance (with the baneful effect of almost full employment and almost no inflation...).<br /><br />You also said that the nations of the Euro periphery, if adequately informed about macroeconomics (sc. by yourself or your ilk), could rightly accuse Germany of stealing some of their jobs.<br /><br />And to top it off, your present postdeclares that German employers and employees (those dastardly unions!)connived in a policy that would take jobs away from their Eurozone partners. <br /><br />You will have guessed by now what Lord Hailsham said. I find it more apposite day by day.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-45580587218899102442015-12-08T15:49:28.253+00:002015-12-08T15:49:28.253+00:00Germany's wage policies in the 1990s were quit...Germany's wage policies in the 1990s were quite sensible. If you had to choose between large scale job losses and wage moderation, you go for the latter. Luckily Germany has reasonable unions,such a policy would obviously never have worked in France. If we are to treat the euro area as one single economic area, why blame the one country that did the right adjustments and not about the many others that welcomed low interest rates and did not care about the impact EMU would have on their economies (e.g. no external devalution)?C Meyernoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-47856287552385025202015-12-08T01:55:40.605+00:002015-12-08T01:55:40.605+00:00Thanks, Anonymous. I had to think about it for a b...Thanks, Anonymous. I had to think about it for a bit, but yes, that seems right.Anonymoushttps://www.blogger.com/profile/07115423820938009661noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-5997688753464608222015-12-07T17:00:29.675+00:002015-12-07T17:00:29.675+00:00Now you are ranting. Have not time to read Wiki.Now you are ranting. Have not time to read Wiki.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-55602771356817071842015-12-07T16:55:17.914+00:002015-12-07T16:55:17.914+00:00"Is Germany responsible for this part?" ..."Is Germany responsible for this part?" I do not argue here that it is. I have often argued that fiscal policies should have been much tighter in these countries.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-48374310348794581432015-12-07T13:52:02.423+00:002015-12-07T13:52:02.423+00:00Heiner Flassbeck is arguing equally for 20 years n...Heiner Flassbeck is arguing equally for 20 years now, most forcefully on his blog. Almost nobody in Germany is listening to him. He tried to change course being Finance Minister Lafontaines vice-minister in Germany 1998/99 (I remember with pleasure the wage rises we - the civil servants - got in 1999-2000 which might have been a consequence of the effort to prevent the dangerous developements we are facing now). Unfortunately they threw Lafontaine and consequently Flassbeck out of office in 1999 (well, officially he wasn't sacked but resigned). We all know btw that the anglosaxon financial elites feared and loathed Lafontaine as "the most dangerous man in Europe" (headline The Sun) because he threatened to dry out their most profitable fx business. hhhttps://www.blogger.com/profile/05268998093961522821noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-81924992759774189442015-12-07T13:14:01.743+00:002015-12-07T13:14:01.743+00:00Benefitting from undervalued currency on expense o...Benefitting from undervalued currency on expense of other countries, especially if they ought to be your partners, is not capitalistic. Mercantilism is more suitable.<br /><br />The current political situation within Europe concerning refugees and migration is directly linked to this and the German policy on Europe in general. Other countries are taking their chance to pay them back by adopting their strategy: your problem, not ours - deal with it.banananoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-16524342602557928582015-12-07T12:58:56.903+00:002015-12-07T12:58:56.903+00:00Sounds logical for swabian housewifes. But pretty ...Sounds logical for swabian housewifes. But pretty far from reality since there is no consideration of exchange rates.<br /><br />If one reduces wages to gain competitivness, resulting in growth of exports, currency will revaluate to maintain balance by cheapen imports at the expense of domestic demand.<br /><br />Competing with China e.g. solely on basis of loans - well, good luck with that.<br /><br />" Germany should have complained more about these models before the crisis, not the other way round. "<br />Germany fed those bubbles. The enormous export surplus requires an enormous amount of debt.<br />In the end the Germans provided both, goods and money to buy those, in exchange for the dubious title Exportweltmeister.<br />Since that title turned into a national sanctury they could have thrown all their excess exports in the sea. Wouldn't make any difference.banananoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-67238788921503667832015-12-07T12:26:51.953+00:002015-12-07T12:26:51.953+00:00@patrick amon:
- "doesn't the fault lie i...@patrick amon:<br />- "doesn't the fault lie in those other countries (whose unions, for instance, apparently prefer higher wages for their present members over generally higher levels of employment)?"<br />If everybody does it, then it becomes a 'race to the bottom'. No country will reach full employment, actually the opposite happens.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-72581087980652016392015-12-07T10:08:42.270+00:002015-12-07T10:08:42.270+00:00"In macro terms it is exactly equivalent to b..."In macro terms it is exactly equivalent to beggar my neighbour devaluations within a fixed rate system. German employers and maybe employees are gaining at the expense of other EZ countries."<br /><br />The beggar my neighbour part would be IMHO the share that happened with no wage increase in the affected EU countries, i.e. the share that was caused by German reduction of wages.<br /><br />However, we see at the same time an increase of wages in the southern European countries, this with stagnating or decrasing relative competitivenes of these countries.<br /><br />Is Germany responsible for this part? How much did this contribute to the whole problem?<br /><br />Or more generally: How did these countries plan to react to changing situations when they were applying for Euro zone membership? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57045229488940843632015-12-06T02:41:54.873+00:002015-12-06T02:41:54.873+00:00Ultimately, isn't it, the issue is simply this...Ultimately, isn't it, the issue is simply this one.<br /><br />http://www.irisheconomy.ie/index.php/2015/11/30/the-euro-debate-and-the-abuse-of-language/<br />Anonymoushttps://www.blogger.com/profile/07115423820938009661noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-63342874991041496912015-12-06T01:50:26.113+00:002015-12-06T01:50:26.113+00:00Supposing that German trades unionists are not les...Supposing that German trades unionists are not less effective negotiators than other trades unionists then they will ensure that the trade-off you refer to in 2 will not be to the detriment of employees. The goal of full employment surely remains a good one. If the effect is to increase unemployment in other countries, doesn't the fault lie in those other countries (whose unions, for instance, apparently prefer higher wages for their present members over generally higher levels of employment)?Anonymoushttps://www.blogger.com/profile/07115423820938009661noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-48260474803465126852015-12-05T19:29:31.119+00:002015-12-05T19:29:31.119+00:00I'm not an economist, but the whole causation ...I'm not an economist, but the whole causation sounds good, basic and correct. But what SWL doesn't care about, doesn't even mention, is the historical context, neither past nor future. I wonder if he wants to get to the Guiness Book for most obtrusive repetition of tautologies.<br /><br />In 1990 Germany embarked on a mission to warp about 16.5 Million people from a pretty low income level to one of the top levels worldwide. And this had to happen FAST. Thinking about a country in the center of Europe with Germany's size and history that fails to level its domestic polarity is left as an exercise to the reader. What solving this problem meant to the - at that time not even existing - Eurozone and its future members was totally unclear and secondary to the german electorate. <br /><br />In the not to far future, huge amounts of Germans (the big post war cohorts born from 1955 to 1970) will retire. They will start to spend their massive savings. The working population is going to shrink likewise. Both factors will "solve" the trade surplus problem very fast, in fact turning it around.<br /><br />Giving an answer to the final question, i suppose - in contrast to the author - Germany's neighbors take these two factors in account.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-47386307227750679492015-12-05T18:57:27.797+00:002015-12-05T18:57:27.797+00:00Interesting answers.
1) Are new jobs without imp...Interesting answers.<br /><br />1) Are new jobs without impacting other wages bad? It seems rather like a good idea.<br /><br />2) In the medium term, Germany's GDP rises. So limiting wage growth in the short term sounds like good investment. And lowering domestic demand in the short run doesn't seem have to have harmed Germany, has it?<br /><br />On the whole, SWL seems to endorse German unions' strategy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-76151729373094005012015-12-05T18:49:00.288+00:002015-12-05T18:49:00.288+00:00Prof. Wren-Lewis,
Clearly, we are using the word ...Prof. Wren-Lewis,<br /><br />Clearly, we are using the word "rules" with different meanings. There are two kinds: Descriptive rules say: If X happens, then Y happens. Normative rules say: In a situation X, one should do Y. <br /><br />I used the word in a descriptive way: That's how things work in the Euro area.<br /><br />You speak in a normative sense: If Southern countries of the EZ ruin their competititivity, Germany and the Northern countries are morally obliged to do the same and raise their unemployment rate. <br /><br />Forgive me if I think that deserves Lord Hailsham's words about Labour supporters. You will find them in Wikipedia. Anonymousnoreply@blogger.com