"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Friday, September 27, 2013

Germany: work sharing and weak currency

Angela Merkle's approval ratings are around 80 percent while Obama's are dropping. Merkel's party won a rare clear majority in the German parliament. Germany's unemployment is around 5 percent while the U.S.'s is at 7.3 percent and the civilian-employment ratio hasn't recovered from the crisis. The surplus countries need to help out the deficit countries with closing their output gaps and achieving full employment. Granted the U.S. would be at Germany's unemployment level with a fiscal policy that was at the same level as the early 2000s recovery.

Germany As Currency Manipulator by Krugman
A correspondent — whose email and name I have lost! — makes a good point. In talking about trade and secular stagnation, I described Germany, with its huge surpluses, as not a currency manipulator. As the correspondent said, however, the euro can be seen as a de facto foreign exchange intervention to keep the de facto Deutsche mark weak. Before 2008, the euro encouraged private capital outflows from Germany to the periphery. Since then, both official rescue packages and also lending among national central banks in the euro area can be seen as taking the place of these private flows. The interbank portion is shown in this chart from Pimco:  

The general point is that if we imagine a euro breakup, I think everyone would agree that the new mark would soar in value, making German manufacturing much less competitive. The German public imagines that it is being cruelly exploited for the benefit of lazy southerners; arguably, what’s really happening is more like China’s purchases of dollars, which are intended not to subsidize America but to boost industry.

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