Balance of payments theory

It is time again for a general remark. The new French initiative to reduce the German export surplus shows a fundamental misunderstanding of the relationships in the balance of payments. It would be particularly important for the German export surpluses that inflicted the European partner’s damage.

Besides the fact that no one can force the unions and management to increase wages, a reduction of German exports (through price increases or reductions in quality) would not automatically have a passivation of the German trade balance result. Probably the balances in Germany and elsewhere remain at the previous level; it would only be exported and imported less. Only the revenues fall, and thus income and probably employment – but not only in Germany but throughout Europe.

The balance of payments is in principle always balanced, apart from statistical errors. The balance of trade as a partial balance is mirrored by the capital account. Crucial for the formation of balances in the balance of trade is the difference between savings and investment, or the difference between the sum of consumption and investment, i.e. the absorption, and the overall economic income of a country.

This is zero the trade balance is balanced. If a country saves more than invested, there is a surplus in the trade balance. If more from Germany sold in international markets than is purchased, the German economy is a loan abroad. The trade surplus was offset by a capital account deficit.

This means of course a credit debt of foreign countries. There is more consumed and invested, as is earned on income. Sometimes this is useful, namely when the country cannot finance all the investments from their own savings.

Sometimes this is less useful if namely, consumption is financed and thus the debt burden rises steadily. In Germany, it is just the opposite. This must also not make sense, because in mass unemployment, the German savings should be invested here to create new employment. The trade surplus reflects not just on the high competitiveness of Germany. An increase in wages does not necessarily lead to protect the domestic economy. For lower income due to decreased export, revenues lead to lower import demand.

CT Airlink offers Limousine Service in Connecticut towns Burlington, Redding, East Haddam, Woodbridge, Litchfield, Haddam, Woodstock, Thomaston, Old Lyme, Middlebury, Easton, Durham, Lebanon, New Hartford, Westbrook, Essex. CTairlink use Limos for CT Limo Service to Newark Airport, LaGuardia, JFK, LGA, EWR and Westchester from Bethel, Brookfield, Darien, Easton, Fairfield, Greenwich, Monroe, New Canaan, New Fairfield, Newtown, Redding, Ridgefield, Sherman, Stratford, Trumbull, Weston, Westport, Wilton CT. provide New York City Limo and Airport Car Service Manhattan to JFK, EWR, LaGuardia, Philadelphia, LGA and Newark Airport. NYC Airports Limo also offers Limousine Service in Queens, Brooklyn, Bronx, Manhattan and Staten Island. NYC Airport Limo is the Low Priced Limousine & Car Service in New York, Connecticut, New Jersey and Pennsylvania States. At we specialize in providing a profession service for NYC Airport Shuttle, NYC Airport Transportation & NYC Wedding Limos. evden eve ucuz nakliyat şehirler arası nakliyat keçiören nakliyat ankara şehir içi nakliyat ankara nakliyeciler sitesi keçiören evden eve nakliyat etlik nakliyat
Comments Off

ECB: independence at risk

Inflation in the U.S. is higher than the inflation in Germany. The ECB, unlike the Fed pursues no political agenda. The primary objective of the ECB is to maintain monetary stability. It says so in the Treaty establishing the European Community.

Unlike the American sister, the FED, have policy goals not high on the agenda of the ECB. The low inflation and high employment provoke a conflict of interest. However, the Greek crisis shows that when the going gets tough, the ECB follows rather political goals. The ECB’s Trichet wants to save Greece. He wants to boost the economy and bends so the pressure of politics. High-risk Greek government bonds will continue to be accepted as collateral. In addition, artificial injections of money from the IMF will be regarded as a blessing.

The resulting inflation risks are played down and accepted. The political independence of the ECB is in danger and the euro threatened to weaken further.

No to the EWF!



It would be better to call in a threat of national bankruptcy to the IMF to help and to make their political independence to benefit. However, it must be made sure that he takes the lead role – as has happened in Latvia and Hungary. The IMF would have the necessary expertise, credibility and authority – all properties where there is a lack of the EU.

Comments Off

We sit in a glass house

There is no alternative to keep Greece through loans from the euro zone countries and the IMF of national bankruptcy – Merkel and her finance minister said this on Friday in parliament. Economists blog author Oswald Metzger disagrees. Of the recently agreed aid to Greece, mainly speculative investors would benefit. With a debt restructuring process, the country would have been better served.

Only Germany is not innocent. With the softening of the stability criteria, the federal government would have made such crises possible. This week in the German Bundestag, the word “alternative” to the most used word of the Chancellor and the Federal Finance Minister in the debate about the Greek rescue, in order to justify the more than 22 billion euros, with which the German taxpayer is liable if Greece after the next three years, did not come off the ground. What kind of world are we living in?

All financial crises will always have the same profile shape because all the players know that the collapse of housing bubbles, the losses are socialized. Business as usual! The gigantic profits were indeed realized by professional strategists for years before the taxpayer had to shoulder the risk of default via government bailout policy. In the case of Greece is similar. In 2000, the crucial mistake was made when in Brussels the political majority, found the Greeks to make admission into the euro zone.

Many insiders put even then the soundness of the Greek financial and economic policy in open question. Nevertheless, critics were appeased with the “no bail-out” clause, is ensured by the Maastricht Treaty that a euro-participating country not for liabilities and debts of other participating countries must adhere or pay.Nevertheless, Europe has watched a decade, as the southern Europeans in the euro area exceedingly indebted further public and private households.

They had so suddenly supposedly leeway because the interest rates because of the euro yield fell massively. Instead we to deal with structural reforms in pensions and pensions, or to tax policy, we continue unabashedly to manipulate the budget statistics and lived on credit.

Comments Off