No, actually he is spot on. The European crisis is layered like an onion and if you peel away the outer layers like banking, sovereign debt and all the things we hear so much about in the press, then you will arrive at the core.
That core is a inner-European trade imbalance which makes the existence of the Euro blatantly unsustainable. If you look at the overall trade balance between the EU and the rest of the world, you will see that lately, imports have been about 20 % larger than exports.
Germany on the other hand is (and has been for years) an extreme exporter. Now if you add up the numbers, you will see that obviously there must be some very heavy importers within the EU. These importers are the countries that we all know and love from the news reports and the way through which they financed their extreme trade imbalances was through massive private debt (not public debt, that's an outer layer).
Germany was only able to reach its position as such a massive exporter by
1. Being incredibly competitive to begin with
2. Artificially boosting competitiveness by 10+ years of nonexistent wage increases, (also crippling German domestic demand)
3. Having a majority of its most important trading partners locked inside the Euro, so that they couldn't mitigate their trade imbalance through inflation (better cash in your Lira fast...), thus boosting the net worth of German exports
And that number 3 is why this crisis is never going away. Yes, never.
All "they" can do is to repair parts of the outer onion shells, buying time. However, that inner core continues to exert a force towards destabilizing the European system. Every single fix to the trade imbalance problem, probably also all partial fixes, are politically infeasible.
You cannot have a continuous flow of money from one part of the European Economy towards the other without some sort of approximately equal flow of money in the other direction. What kind of flow? If we look at the United States as a group of States that is of roughly equal size and has about the same internal inequalities between states as the EU there emerges a list of transfers that are effective in couteracting trade imbalances:
Social security,
Medicare,
Common Bank Insurance,
Military spending (wanna bet there are per capita more soldiers from Alabama than from Maryland?)
and so on.
If this is what can fix this crisis, then I am all for it. However, it seems that I am part of a minority here in Europe. So collapse it is. Ein Ende mit Schrecken oder ein Schrecken ohne Ende.
Thank you for making your post so rich in information while at least giving me the information that you're not responding to anything I said right away.
No, actually he is spot on
No he is not. I'm not even arguing against the euro or ESM. The majority of german economists are.
Ok. I'll admit that I got carried away and failed to actually respond to your 170 economists.
I'm a physicist and one thing that I have learned throughout the crisis is that macroeconomics is plagued by an inflated importance of "schools of thought". Current mainstream macroeconomists disagree on ridiculously many things that a layman would expect to be basic facts. In that regard, it is a huge problem that what you are referencing to is "the majority of German economists".
"The majority of German economists" belong to only one school of thought which has not really proven to be "the" school of thought.
For me personally, the most striking thing about this crisis is that what may ultimately break our neck (our as in we the informed public, having our destiny in our hands) is the existence of language barriers. Believe it or not, but the intellectual frame of reference that is taken by the German press and many German economists (and of course all of the politicians) is very different from that of most of the rest of the world. Several things that should urgently be debated in Germany are not debated, since _everyone just knows_ that they are wrong.
For instance, have you ever read an argument for higher inflation from a German economist (not Munchau) in an important German newspaper? Why not? Why is the hyperinflation of Weimar mentioned every now and then but no one publicly gives thought to why there were (and are) many countries that manage to live with inflation higher than 2% (the long term italian rate was around 4-5% throughout the eighties and nineties)?
Why is there no discussions of historical occurences of deflation and the problems/catastrophes they caused?
But let us add something more useful:
How should a non-economist judge if a text written by an economist is trustworthy?
Exclusion criteria:
* Claiming things without citing historical examples or adequatly discussing historical counterexamples. Believe it or not, most things out there have happened before.
* Inability to understand the frame of reference/underlying assumptions of the people whose opinion is _opposite_ to yours. If you think that "they" are all idiots, then you have not understood them or the problem.
* Not having a model. By model I mean that assertions of the type "When X happens, then Y should follow and Z should be impossible." or such are made.
Tldr: At this point there is no reason to just trust economists, no matter how great their number.
> And that number 3 is why this crisis is never going away. Yes, never.
It'll go away when there is a huge financial and fiscal integration of the Eurozone (with a finance ministry, and large, integrated taxes). This, of course, looks right now like a pipe dream. But as the only way out, it may become true anyway.
That core is a inner-European trade imbalance which makes the existence of the Euro blatantly unsustainable. If you look at the overall trade balance between the EU and the rest of the world, you will see that lately, imports have been about 20 % larger than exports.
Germany on the other hand is (and has been for years) an extreme exporter. Now if you add up the numbers, you will see that obviously there must be some very heavy importers within the EU. These importers are the countries that we all know and love from the news reports and the way through which they financed their extreme trade imbalances was through massive private debt (not public debt, that's an outer layer).
Here are some numbers on the trade balances (yeah, I know, it's wikipedia. But they present both figures in a readable manner and they list the sources.): http://de.wikipedia.org/wiki/Au%C3%9Fenhandelsstatistik#Entw...
Germany was only able to reach its position as such a massive exporter by
1. Being incredibly competitive to begin with 2. Artificially boosting competitiveness by 10+ years of nonexistent wage increases, (also crippling German domestic demand) 3. Having a majority of its most important trading partners locked inside the Euro, so that they couldn't mitigate their trade imbalance through inflation (better cash in your Lira fast...), thus boosting the net worth of German exports
And that number 3 is why this crisis is never going away. Yes, never.
All "they" can do is to repair parts of the outer onion shells, buying time. However, that inner core continues to exert a force towards destabilizing the European system. Every single fix to the trade imbalance problem, probably also all partial fixes, are politically infeasible.
You cannot have a continuous flow of money from one part of the European Economy towards the other without some sort of approximately equal flow of money in the other direction. What kind of flow? If we look at the United States as a group of States that is of roughly equal size and has about the same internal inequalities between states as the EU there emerges a list of transfers that are effective in couteracting trade imbalances:
Social security, Medicare, Common Bank Insurance, Military spending (wanna bet there are per capita more soldiers from Alabama than from Maryland?) and so on.
If this is what can fix this crisis, then I am all for it. However, it seems that I am part of a minority here in Europe. So collapse it is. Ein Ende mit Schrecken oder ein Schrecken ohne Ende.