"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, November 01, 2013

German macro

More Notes On Germany  by Krugman
A few more things to say about Germany’s trade surplus and the US report saying, correctly, that it’s harmful to the world economy.

The worst thing, if you ask me, in the Spiegel report on the controversy is the statement by Germany’s Economics Ministry that Germany’s surplus is
a sign of the competitiveness of the German economy and global demand for quality products from Germany.
Economists everywhere should read this and weep. It is a basic accounting identity that

Current account = Savings – Investment

Any story about the determination of the current account balance must take this identity into account. Suppose you have wonderful products that the world loves; even so, if you have low savings and high investment, you must run deficits. How can this happen? Simple: you end up with a high value of your currency and/or high wages relative to competitors.

So while it’s impressive that Germany can run a surplus despite quite high labor costs, and that’s a testimony to the quality of its stuff, ultimately the surplus reflects high savings relative to investment.

And we are, as I said in a different context just the other day, in a world awash in savings, a world in which someone who decides to spend less and save more makes the whole world poorer. That’s not the normal situation, but it’s where we are now, and where we have been for five years.

Does the German Economics Ministry really not understand any of this? My guess is that it doesn’t — that Germany really does see itself as a role model, believes that all would be well if everyone behaved the same, and doesn’t see the notion of a world in which everyone runs big trade surpluses as being problematic in the least.

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