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Trump calls out Germany over the Euro

by Zwackus Thu Feb 2nd, 2017 at 12:29:12 AM EST

This is interesting.

Trump's trade advis​​er says Germany uses euro to 'exploit' US and EU

The relationship between Germany and the Euro has long been one of interest here. Let's discuss.

Frontpaged - Frank Schnittger


From the article in the Guardian ...

Donald Trump's top trade adviser has hit out at Germany and accused the country of gaining an unfair trade advantage from the "grossly undervalued" euro.

In a sign that the Trump administration is targeting currencies in its approach to trade deals, Peter Navarro, the head of the US president's new National Trade Council, told the Financial Times (£) that the euro was like an "implicit Deutsche Mark".

Germany "continues to exploit other countries in the EU as well as the US with an `implicit Deutsche Mark' that is grossly undervalued", he said.

So, Navarro is accusing the Germans of pushing the ECB to deliberately undervalue the Euro in order to increase the competetivieness of German exports outside the Euro.

It bears mentioning that Navarro is somewhat crazy. 'Brutal, amoral, ruthless, cheating': how Trump's new trade tsar sees China

Navarro has penned a number of vociferously anti-China tomes including Death by China and Crouching Tiger: What China's Militarism Means for the World.

In The Coming China Wars - a 2006 book that Trump has called one of his favourite on China - Navarro portrays the Asian country as a nightmarish realm where "the raw stench of a gut-wrenching, sweat-stained fear" hangs in the air and myopic, venal and incompetent Communist party officials rule the roost.
Top Trump adviser: News Corp bashes him due to commercial interest in China
Read more

The Harvard-educated hardliner accuses "cheating China" of destroying both American factories and lives by flooding the US with illegally subsidised and "contaminated, defective and cancerous" exports.

American politicians must "aggressively and comprehensively address the China problem" before it leads to full-blown conflict, Navarro writes.

The majority of news coverage is rather critical of Navarro and his accusation. A common line of criticism can be seen in this article from CNBC. Trump's beef with Berlin - Why accusations of euro exploitation are simply `nonsense'

The article goes on to explain the German aversion to inflation and preference for a strong currency, and that ECB has been pushed into quantative easing against German opposition. Strangely, the Euro crisis of a few years back was not mentioned at all.

There is an interesting tidbit at the end, though, on the German trade surplus within the Euro.

Navarro, whose comments have been widely interpreted as anattempt to talk down the U.S. dollar in conjunction with recent remarks of asimilar hue by President Trump, does have some supportable basis for hisstatement, John Redwood, chief global strategist at Charles Stanley, told CNBC Wednesday.

"They have a point. The German surplus is colossal. It is causing enormous strains in the euro zone itself which are not helpful. The Greeks and the Italians and the Spaniards are on the wrong end of it," Redwood argued.

"Germany as the strong area with the big surplus has to share that money more willingly with Greece, Spain, Italy and Portugal, otherwise they will have a series of crises and in the end they undermine the very customer base for Germany industry that has driven that surplus in the first place," the global strategist warned.

Tim Worstall at Forbes has a rather different take on the matter. Trump Trade Team Gets One Right - Germany Benefits On Trade From Weak Euro

As regular readers will know I've very little time for Navarro and his odd views on trade. But this part of it is indeed true. The euro is a much weaker currency than an independent DMark would be. That makes Germany's exports markedly (sorry) cheaper than they would be without the presence of the euro. It also, obviously, makes Germans poorer than they would be without the euro but that's not something that does or should worry Navarro.

Display:
Even a stopped clock is occasionally accurate. Let's just forget that it's Trump that is airing this outlandish, but accurate, theory.

The problem is that Trump's solution to the trade problem is to destroy the EU. Compounding this is that, from an economic point of view, he may find allies within.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu Feb 2nd, 2017 at 08:04:00 AM EST
Krugman
Peter Navarro, the closest thing Trump has to an economic guru, made some waves by accusing Germany of being a currency manipulator and suggesting that both the shadow Deutsche mark and the euro are undervalued. Leaving aside the dubious notion that this is a good target of US economic diplomacy, is he right?

Yes and no. Unfortunately, the "no" part is what's relevant to the US.



Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Feb 2nd, 2017 at 08:57:51 AM EST
To any who can see beyond the end of their nose and who are aware of the individual countries composing the EU it is clear that Germany is a massive beneficiary of the monetary and economic policies that have been followed since the creation of the Euro. And it is equally clear that the damage these policies have done has been vastly worse in Greece, Ireland, Spain, Portugal, Italy, Cyprus, etc. than any effect on the USA. What Trump and Bannon care most about is stirring the US domestic political pot. His second objective is to cement in place his US triumph by spreading it abroad - just as the US Neo-liberals have attempted to do.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Feb 3rd, 2017 at 05:37:10 PM EST
[ Parent ]
Worstall is right. Navarro - and Trump when he has made similar claims earlier - are not wrong.

Then again, I am sure they will come up with some actions based on this that I will not agree with.

by fjallstrom on Thu Feb 2nd, 2017 at 08:58:20 AM EST
Looking at trade data one can argue the Euro is slightly undervalued. But this is a transitory feature that will correct itself once economic data starts pointing to a more sustained growth. The Euro is a free floating currency, in the medium to long term it always converges to where monetary policy and trade dictate.

Were Jens Widemann president of the ECB, the Euro would be probably now north of 1.5 USD, and the Eurozone likely a much smaller place.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Thu Feb 2nd, 2017 at 02:21:52 PM EST
Were Jens Widemann president of the ECB, the Euro would be probably now north of 1.5 USD, and the Eurozone likely a much smaller place.

The question would be if there remained any members south of the Alps, except, perhaps, France. And whether the Euro was south of 2 USD.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 03:32:30 PM EST
[ Parent ]
France is South of the Alps?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Feb 8th, 2017 at 05:08:49 PM EST
[ Parent ]
As in Nice, Marseilles, Toulon...:-)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Feb 8th, 2017 at 07:06:43 PM EST
[ Parent ]
Of course there are the French Alps, Lyon, and the foothills of the Alps, but it is an old phrase. Perhaps South of the Rhine would have done better.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 10:59:50 PM EST
[ Parent ]
Navarro has some valid points, which he has had since 2011 when I audited his online Intro Macro course via Coursea. But his ideology may be getting in the way of his assessment of Chinese economic competence. The way they were able to avoid devastation by the GFC in '08 was impressive, even if it did lead to a giant real estate bubble. The US is hardly in a position to fault others for real estate bubbles. Part of this dance was probably made possible by their control over the sizeable state enterprise sector.

My concern is that Trump's rhetoric may be a godsend to the CPC. The Chinese economy has been struggling for the last couple of years and the thing the CPC fears the most is economic failure. Large scale unemployment could produce social unrest and cost the CPC the presumption of 'having the mandate of heaven.' Of course, if they can blame any economic downturn on US disruption, and they certainly will and probably already are, that will greatly aid them surviving the crisis. One thing the Chinese people well understand is the danger of foreign meddling in Chinese affairs.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 2nd, 2017 at 09:13:28 PM EST
Navarro has some valid points, which he has had since 2011 when I audited his online Intro Macro course via Coursea.

If his argument is that the Germans are undervaluing the euro relative to other currencies in a systematic way -- then no, his points are not valid.  And, in any case, we're free to adjust our policy, even if he were right.

The internal balances of the eurozone are not the same as the external balances of the global currency system, as Luis noted.  New York running a trade surplus with Mississippi doesn't imply the US is out of balance with the eurozone.

Navarro's just an idiot.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Feb 8th, 2017 at 03:48:27 AM EST
[ Parent ]
I certainly agree with your last paragraph, but don't agree with you on Germany's actions. Supporting the independence of the ECB, especially when it has historically acted in Germany's interests, is just one thing. Opposing resolutely any changes to overall policy that might provide mutually beneficial recycling of Eurozone member state surpluses into Eurozone member state deficit countries in the form of profitable investments, the profits from which would, after all, flow first to the creditor states, is just one problem. Due to German intransigence monetary policy by the ECB is the about the ONLY tool available and the ECB is still strongly constrained about how extensively it can use monetary policy and other 'tricks' like QE. But then, who is the champion of economic sanity for the Eurozone? Varoufakis at least tried.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 03:50:12 PM EST
[ Parent ]
I mean that so much of a recycling project makes such sound economic sense that it is folly that Germany is not pushing it in its own self interest. That is because of the consequences of playing to least common denominator prejudices of the German people by Merkel et al.

As has been pointed out, making retirement health care equally available in all countries for citizens of any state could enable Germans to retire in warmer climates where it is cheaper to live while still receiving the same quality of health care. And the provision of that health care in countries such as Spain, Italy and Greece would be a great boon to their economy, as would the expenditures of the retirees in their countries. Much like New Yorkers retiring in Florida.

This ain't rocket science. It is entrenched tribal stupidity become national policy.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 03:56:14 PM EST
[ Parent ]
Of course it is.  And it has nothing whatsoever to do with the merit of Navarro's argument about the euro's value.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Wed Feb 8th, 2017 at 09:52:28 PM EST
[ Parent ]
Where have I endorsed Navarro's views? I audited his intro macro course on line. I wanted a 'mainstream' overview of macro as a base. That I pretty much got. But I disagreed with him on many of his opinions, as is evident in my first post on the subject and my comment about his views of China.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 9th, 2017 at 03:24:06 PM EST
[ Parent ]
You said you endorsed my last paragraph but not my commentary on Germany, and you then proceeded to try to rationalize his shallow argument, ARG.

His take is not "mainstream" -- and I strongly question how "mainstream" (whatever the hell that means (which is presumably "somethingsomethingsomething 'neoliberal'") that audited class was.  Note, too, folks like Krugman jumping in to call him an idiot.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 11th, 2017 at 12:40:45 AM EST
[ Parent ]
Well, he got his degree from Harvard. That probably explains a lot. And he is a LOT more conservative than any of us here. Sadly, he does seem to me to fit into "Mainstream US Economics". After all, Chicago and Harvard are two of the chief gatekeepers of what is allowed into that 'mainstream'. (I sometimes visualize a stream of piss.)


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 11th, 2017 at 01:52:01 AM EST
[ Parent ]
Harvard is no such thing, and Chicago hasn't been for 20 damned years.  Harvard is basically a laughingstock.  It has never been of much importance to "mainstream" economics -- and that goes back to Schumpeter's homophobic babbling on Keynes.

We've been over this a hundred times now.

Lots of stupid people graduate from Harvard.  There's a reason this fucking moron teaches at Irvine and has to grab onto Trump's pant leg when even quite right-wing economists like Prescott endorsed Hillary.

Stop setting up straw men.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 11th, 2017 at 05:45:23 PM EST
[ Parent ]
You sound as though your view of the economics profession is dominated by ad hominem invective, though I doubt that is actually the case.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 11th, 2017 at 06:18:37 PM EST
[ Parent ]
No, my view, as is my view on most professionalized fields, is based on my own observations and listening to the higher-ups who have credentials and stuff.  It just so happens that I'm a bit more qualified to evaluate who the higher-ups are in this field.

I don't listen to morons like Gwyneth Paltrow for views on Mainstream NutritionTM either.  For the same reasonI don't ask the kid at the cash register at McDonalds how to fix a transmission.

You don't know what econ is.  It's a running theme with you, ARG.  You latch on to these stupid fucking terms like "mainstream" and "neoliberal" and all of this trash, and you audit some idiotic class where some moron confirms all of your prejudices, and you go babbling about "What Econ IsTM".

It's like that Australian who wrote Debunking Economics but couldn't do basic fucking algebra.  Steve Something.  And when you point out to Steve that his model goes to shit when you note he did the derivative wrong, and he ignores that and instead goes babbling about how Paul Krugman hurt his feefees.

Be better.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 12th, 2017 at 01:18:08 AM EST
[ Parent ]
It is true that I am not an economist. I have become a student of economics, especially the history of economics, economic thought and its role in intellectual history in the USA. I am hardly alone in the world in my views on the current state of economics. The whole heterodox end of the spectrum is well aware of the same deficiencies of which I complain and their views inform mine: Solow, Colander, Stiglitz, Hudson, Jamie Gailbraith and his father before him, etc., etc.

And then there are the terms neo-liberal and 'mainstream economics' about the use of which you complain. As you say, we have been through this before. On FB we had a long discussion about the term 'neo-liberal' with you claiming I didn't understand what it was, my stating the commonly accepted definition and you agreeing that that was exactly how you defined it.

I had not wanted to press the issue, but, as you have, I will proceed. What I see is you not liking the term and evading the meaning. This is because it applies too closely to you and your views, IMO. Your champion in the '16 elections was Hillzilla and you have been very critical of those of us who complained that she did not actually support progressive policies. Nor do you want to accept any real inquiry into why she lost. To you it is clear that that is because of Bernie supporters.

The Clintons are the US equivalent of Tony Blair: US neo-liberals who abandoned unions and, with unions, the working class as such. IMO, they did good work on a lot of serious social issues from race to LGBT, but I don't see abandoning economic issues as a feasible path to electoral dominance. Even Bill Clinton's slogan was "Its the economy, stupid". Had she been more convincing in her adoption of Sander's proposals after the convention she could well have carried WI, MI and PA. She didn't turn out enough of the people Sanders had energized.

Then there is your anger. "Get out of my god-damned way.  They're in." I understand being angry. But the intensity of your anger has nothing to do with the validity of your arguments. That you act as though it does is a problem for you to deal with, not an argument. Yours is not the only opinion or the only ego to be offended by the outcome of the 2016 election. People can and do disagree with you on many points. Spend more time trying to find common ground with opponents and less on trying to de-legitimize their opinions and the comity of your comments will improve.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 12th, 2017 at 11:03:03 AM EST
[ Parent ]
How on God's green Earth are Solow and especially Stiglitz heterodox?  They're both Nobel laureates, FFS.  Stiglitz won his only 15 years ago, back when RBC was the dominant macro theory.  This is what I mean:  You don't ac tally know what "mainstream" is in econ.  It's just a buzzword.

You stated the common definition of neoliberal.  We sorted out the criteria via (I think) Wikipedia, and I agreed.  You then applied it to Hillary, who met all of one of the criteria.  And when I pointed this out, you dodged my comment and undoubtedly babbled about The ElitesTM.

Now on this:

This is because it applies too closely to you and your views, IMO. Your champion in the '16 elections was Hillzilla and you have been very critical of those of us who complained that she did not actually support progressive policies.

Small problem here:  I voted for Bernie.  But, by all means, knock those straw men down.

Granted, I did so mostly to help send a message to the Clintons on foreign policy grounds, because Hillary is too hawkish.  I also voiced skepticism of Bernie's ability to win, because I knew Bernie had skeletons in his closet that Hillary wasn't attacking him on -- because she knew she had him beat and didn't want to harm party unity.  And because it was clear Bernie was basically the dog who caught the car.

This all seems perfectly reasonable to me.  They were both lousy candidates, and I had no champion in that race, so I voted practically.  The closest thing to my champion was the guy they were running to assume office behind.

So don't put words in my mouth.

As has been told to you -- by me, Izzy, others -- again and again, we agree with you in large part on Bill Clinton.  The Blair analogy is quite right with respect to Bill.  But The ClintonsTM are two different people.  They always have been.  You do understand that Hillary Clinton is allowed to have her own views that may contradict her husband's, right?

And we have pointed out to you, numerous times, the differences in policy proposals.  You assert The ClintonsTM lack of support for unions.  I don't know why.  And you fail to reckon with the obscenely-obvious issue that the very people you claim The ClintonsTM have fucked on that are the same people who voted for Ronald Reagan.  You further ignore that and assert that working-class whites are right to lash out, which is an utterly irrational argument.

As for the last paragraph -- yes, people are free to disagree with me on any point I try to make.  All I ask is that the disagreement be substantive and not simply moving the goalposts or veering off into utterly-irrelevant assertions.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 12th, 2017 at 06:30:04 PM EST
[ Parent ]
I included Solow and Stiglitz as they are highly critical of the status quo in economics. Solow and Colander both testified about the problems of the dominance of limited views of economics before a House subcommittee in 2010, both being especially critical of DSGE and it being the only model for which Fed funding was available for research. While having Nobel prizes they have been willing to publicly criticize much of the rest of, for lack of a better term, 'mainstream economics'. There are 'top journals' and those journals are or were recently controlled by nominees of institutions with views whose implications soothe the prejudices of very wealthy donors to their universities - the insane 'new classical' views of Robert Lukas, currently emeritus professor at Chicago, described by Greg Mankiw of Harvard Mankiw as "the most influential macroeconomist of the last quarter of the 20th century." etc. And the overall prestige of Harvard compensates to a degree for any lacking in their economics department.

Within the professional lifetimes of current economists, such as Perry Mehrling, it was necessary for Columbia to accept published monographs as the basis for his PhD, as he could not get his work on money and banking published in 'top journals'. But you can dismiss this if you will. I cite it as Mehrling was the one from whom I learned about money and banking. And I see the stranglehold that such figures, along with the practices of the Fed have on what is acceptable in the economics profession as being very detrimental to what our society needs to do to create a livable and sustainable society. This might not affect you so directly as you are not currently on an academic track.

Wait too long for needed changes and the very possibility of such change can be eroded. That is what happened when Trump was elected. Had Obama even done what the Justice Department could do to bring Wall Street executives to account, that might have changed popular perceptions and the outcome in 2016. On the other hand, I appreciate Obama's restraint on foreign policy, especially as contrasted with Hillary. Hillary certainly is and has been her own person. In this election she might have done better to listen more to Bill and less to Mook and Podesta. And while having control of the DNC almost as an inheritance and Hillary's use of the DNC did stymie Sanders, that was and is indefensible as a practice for primary elections. And it did not work out too well this time.

Twice in the last eight years the selection of very centrist Democratic candidates for President has resulted in enormous missed opportunities. In 2009 we could have reset regulation of Wall Street to an updated version of what FDR bequeathed, but Obama was never going to do that. Opportunity missed. Then there is Sanders in 2016. Another opportunity missed. Are we ever going to learn? I hope so for your sake, as you might not be able to retire in place in your current home if climate change continues to exceed generally acceptable expectations. At least you are on the Gulf coast. The Atlantic coast will be worst and soonest hit.
   

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 12th, 2017 at 08:08:38 PM EST
[ Parent ]
Stiglitz and Solow are not criticizing the mainstream academic school of thought. They are calling out the overtly partisan hacks that even other mainstream scholars are uncomfortable with.

This puts Stiglitz and Solow outside the mainstream culture of economics, which doesn't police partisan hackery as long as it is politically correct partisan hackery. But it does nothing to put them outside the mainstream research tradition.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 13th, 2017 at 07:14:52 PM EST
[ Parent ]
And that distinction between culture and research tradition is vital. IMO, the chief reason we don't see such critiques more often is the high price so many can be made to pay for offending the interests of wealthy sponsors of self serving theory, from J.D. Rockefeller to the Koch Brothers and a whole bunch more. It is the results of those wealth serving pressures that economics resembles the fashion industry more than a scientific discipline and it is that with which I profoundly disagree. It is pressure from wealthy donors that keeps the public understanding of economics confounded and that allows the perversion of economics to do actual harm to the broader society. For instance, see Varoufakis, A Most Peculiar Failure, where he shows the way in which weak and strong claims for unprovable nonsense has marked the public discourse over economics for decades - actually, for more than a century.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 13th, 2017 at 08:00:32 PM EST
[ Parent ]
And Thomas Piketty is well within the research tradition of economics, which is why Capital is so important. Among other things it makes things more difficult for the partisan hacks, as you term them. Not that they ever seem to suffer consequences, witness Reinhart and Rogoff. Growth in a Time of Debt simply did too great a service to the donors' interests for the authors to ever be seriously discredited.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 13th, 2017 at 08:09:36 PM EST
[ Parent ]
Joseph Stiglitz -- Wikipedia, the free encyclopedia
Stiglitz's most famous research was on screening, a technique used by one economic agent to extract otherwise private information from another. It was for this contribution to the theory of information asymmetry that he shared the Nobel Memorial Prize in Economics in 2001 "for laying the foundations for the theory of markets with asymmetric information" with George A. Akerlof and A. Michael Spence.

Before the advent of models of imperfect and asymmetric information, the traditional neoclassical economics literature had assumed that markets are efficient except for some limited and well defined market failures. More recent work by Stiglitz and others reversed that presumption, to assert that it is only under exceptional circumstances that markets are efficient. Stiglitz has shown (together with Bruce Greenwald) that "whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient". In other words, they addressed "the problem of determining when tax interventions are Pareto-improving. The approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained Pareto optima."

Thus Stiglitz used a more strict, mathematical research tradition, and confronted the orthodox culture.

And currently, he is weighty activist in his critique:

Joseph Stiglitz Says Standard Economics Is Wrong. Inequality and Unearned Income Kills the Economy -- Evonomics.com

by das monde on Tue Feb 14th, 2017 at 12:54:33 AM EST
[ Parent ]
First of all, it's "Lucas," not Lucas.  Second of all, he hasn't been anything resembling "mainstream" for a long-ass time.  Shit, Lucas has become a laughing stock by the time I was an undergrad -- and at a university notoriously infused with Koch money at that.

Greg Mankiw is a half-decent mathematician masquerading as a serious economist.

Once again, "mainstream" isn't whatever gibberish you read on some idiot blog.  If you want mainstream, read Krugman and you "heterodox" friend, Stiglitz.  Both of whom are more representative of the mainstream that these people you keep bringing up.

Stiglitz's consumption function was the foundation for both his and Krugman's Nobels.  Solow's growth model is literally the first model they teach you in every Macro 201 class.  We in "not even wrong" territory here.

As for the Hillary/Bill/conspiracy theory on the DNC and Bernie bit -- now you want her to listen to Bill, the Unholy God of "Neoliberalism".  Helpfully demonstrating what a bunch of horseshit the whole conflict was the whole time.

Complete gibberish.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Feb 14th, 2017 at 02:51:56 AM EST
[ Parent ]
...adding:

God damn, that comment from me was like an Autocorrect Holocaust.  Sorry.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Feb 14th, 2017 at 02:55:33 AM EST
[ Parent ]
You needed this control shot...

Nothing about a consumption function on the Wikipedia page on Stiglitz.

What is taught in freshman courses is not necessarily mainstream in policy building. Economics is a motley subject, with a lot of speculative assumptions, ideological deductions, hand waving with graphs and some serious math, mechanism design. The same economist can easily produce something standard for a freshman course and a theory against prevailing operative streams.

by das monde on Tue Feb 14th, 2017 at 04:58:58 AM EST
[ Parent ]
...adding:

And in case Steve ever reads this.  Q ≠ q.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Feb 12th, 2017 at 01:20:57 AM EST
[ Parent ]
Yes, Germany is on a self-destructive course, not exactly a first.  They can't get over their inferiority complex and hoarder mindset.  The folks who run the country have the same mindset as the folks who used to insist that the DM5 coin keep being minted because they wanted to get change in "hard money," not paper, even though the coins were just steel.
by rifek on Thu Feb 9th, 2017 at 02:38:46 PM EST
[ Parent ]
What does any of that have to do with Navarro's argument that the Germans are artificially undervaluing the euro?  Those are all internal eurozone trade issues.

Look, it's a floating currency.  Navarro's an idiot.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Wed Feb 8th, 2017 at 09:51:34 PM EST
[ Parent ]
I never claimed that Navarro was correct on that. Just that, overall, the effect of net German policy is to vastly favor German interests over those of the rest of the Eurozone. And floating currencies have to be understood in a broader context than just monetary policies. Do you argue that, were Germany to repudiate the Euro and reestablish the Mark that that mark would be valued at about where the Euro is today?

Few here would, I think. The existing situation with currency value and the competitiveness of the various national economies comprising the Eurozone is highly complex. Competitiveness can be rigged in a variety of ways. Germany does so in no small part because of the Hartz 2 agreements and in ways that also disadvantage the average German.

I did not see enough actual economic analysis from Navarro to tell what his position on German currency manipulation was. Perhaps I misread. But German exports are undervalued compared to what they would cost were Germany to have its own floating currency and Germany has been quite clever in crafting this arrangement to the benefit of German elites.

A more accurate statement would be that Germany has, effectively, managed to undervalue its exports, largely at the expense of its Eurozone partners. The problem I have with that is that it doesn't pass the smell test for me and a lot of others, mostly the victims.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 10:10:16 PM EST
[ Parent ]
To be clear, the "that" in the last sentence of the above comment refers to what Germany has accomplished for itself economically via the Euro, the Eurozone and Germany's resulting economic policy and political efforts.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 9th, 2017 at 03:28:36 PM EST
[ Parent ]
Revenue sharing not only makes sense, it is or course essential.  Try to imagine the US existing without it.  But if it had been built in from the start, Germany's interest in creating the open EU would have been, shall we say "greatly reduced."
by rifek on Thu Feb 9th, 2017 at 02:31:36 PM EST
[ Parent ]
Navarro doesn't actually say whether Germany meets the quantitative criteria to be considered a currency manipulator as defined under the  Trade Enforcement and Facilitation Act of 2015.  Also, shouldn't the analysis be more correctly applied to the Eurozone as a whole, as that is the currency we are talking about?

Trump seems to adopting a scattergun (or scatterbrained) approach to selecting targets without having a prioritised action plan to deal selectively with what he considers to be his biggest problems. He seems to be upsetting every World leader he talks to. Even Theresa May was forced into an embarrassing climbdown over her initial reaction to the Muslim immigration ban.

It's reminiscent of Nazi Germany attacking the Soviet Union before it had won in western Europe. Why attack Turnbull when he might need his help to deal with China?

But perhaps the real purpose of Trumps tactics is just to generally throw his weight around, to see if he can intimidate anyone to do his bidding.  Somehow I don't think this will work with the EU, and with Merkel in particular. She will probably be strengthened by Trump raising the ghosts of Germany's past, and the EU will have a useful external threat to enhance internal cohesion and solidarity just when it needs it most - as Brexit and the hard right seek to overturn the postwar settlement of Europe.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Feb 2nd, 2017 at 09:31:01 PM EST
Yes, Germany takes advantage of the EU, and the euro is softer than the DM would be now.  If these weren't so,  Germany never would have pushed for a unified market and currency.  For the neolibs to be claiming that Germany's manipulations inside the Eurozone are somehow a significant part of US economic woes is the usual level of crazy and probably a set-up for something that will benefit the 0.01% at the expense of the rest os us.
by rifek on Thu Feb 2nd, 2017 at 09:37:40 PM EST
Right now it is the Mediterranean members who desperately need a soft currency to help revive their ailing economies.  Germany can do just fine even with a much harder currency.  If anything is dragging the Euro down right now (in addition to the prior quantitative easing) it is Brexit - courtesy of Farage and Trumps new bestie, Theresa May.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Feb 2nd, 2017 at 09:50:20 PM EST
[ Parent ]
Brexit, general internal uncertainty, and unwise management of the euro are quite sufficient to keep the euro soft against the USD.  Germany doesn't need to do anything nefarious.
by rifek on Thu Feb 2nd, 2017 at 09:56:54 PM EST
[ Parent ]
The EU internal effects may be so. But I think some people are seriously overestimating the capabilities of the German establishment. Trump is of course fanning some conspiracy theory but I don't know why the rest of the world is entertaining ideas of deliberate currency manipulation.

We all stumbled into this. If the German establishment had its say, interest rates would long have been jacked up to make the Euro a continental DMark (nevermind depression or sovereign bankruptcies).

Schengen is toast!

by epochepoque on Thu Feb 2nd, 2017 at 11:55:47 PM EST
Yes, we stumbled into it.

However, US apparently has a definition that since 2015 no longer demands intent. From Eurointelligence:

A currency manipulator is not what you think it is

A difficulty often encountered in policy discussions is that technical terms have precise meanings that don't necessarily agree with the ordinary language meanings of the words. A case in point is the current brouhaha about Donald Trump's chief trade adviser calling Germany a currency manipulator. The fact is that last year the US senate passed a "customs bill" (the Trade Enforcement and Facilitation Act of 2015), which required the US Treasury to draft criteria defining a country as a "currency manipulator". The criteria developed by the US Treasury under Barack Obama are that, over the previous 12 months, the country:

   * is a "major trading partner" of the US, meaning having at least $55bn of bilateral trade;
   * runs a "significant trade surplus" with the US, meaning more than $20bn;
   * runs a "material" global current account surplus, meaning more than 3 percent of the country's GDP;
   * intervenes in a "persistent and one-sided" way in the FX market, meaning making foreign exchange purchases of more than 2 percent of the country's GDP;

A requirement to act against trade partners that manipulate the currency has been on the books in the US since 1988, but the US treasury was able to wiggle out of it before by claiming - rightly - that it was impossible to ascertain the intentions of a foreign government. Defining the concept of manipulation by means of quantitative criteria gets around this. It also makes protestations against Peter Navarro's suggestion that Germany is manipulating the currency mostly moot, unless they address these quantitative criteria.

Assuming that the Trump administration follows through on this and determines that Germany does meet all of the above criteria, making it a currency manipulator, what actions can Germany look forward to on the part of the US? First, the US government should "engage" the trading partner labelled a currency manipulator, meaning the US would urge the country to implement policies to revalue its currency, reduce its bilateral trade surplus and its current account surplus. If a year after the start of this "engagement" the country is seen to have failed to adopt corrective policies, then the US government would be required to take the following actions:

   * halt new investment in the country by the US' Overseas Private Investment Corporation;
   * generally prevent the US government from procuring goods or services from the country;
   * ask the IMF to investigate the country's macroeconomic policies;
   * take into account the alleged currency manipulation when negotiating trade agreements.

While one could have expected the Obama administration or a successor administration led by a mainstream Democrat or Republican to use the discretion allowed under the customs bill to avoid what could potentially escalate into a trade war with a major trading partner, it is at least plausible if not likely that the Trump administration will rather use any available excuse to restrict trade and investment with Germany - or, for that matter, with China.

by fjallstrom on Fri Feb 3rd, 2017 at 08:27:52 AM EST
[ Parent ]
China? I thought they were selling foreign reserves these days, to preserve the Yuan.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Fri Feb 3rd, 2017 at 09:22:00 AM EST
[ Parent ]
I think China was mentioned as country for trade war, with any flimsy excuse, currency manipulation or other.

I must admit, I don't have a good grasp of what currencies countries are trading. I mean China is running a current account surplus. But I guess you mean that they are using their already established USD stockpiles to buy back Yuan, which of course they can do at the same time.

by fjallstrom on Fri Feb 3rd, 2017 at 10:32:33 AM EST
[ Parent ]
I was referring to that:
* intervenes in a "persistent and one-sided" way in the FX market, meaning making foreign exchange purchases of more than 2 percent of the country's GDP;

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Fri Feb 3rd, 2017 at 11:08:41 AM EST
[ Parent ]
Back to Germany. Does Germany fit that criteria?

(It fits the three others.)

by fjallstrom on Fri Feb 3rd, 2017 at 05:45:23 PM EST
[ Parent ]
I believe so

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 4th, 2017 at 07:54:07 AM EST
[ Parent ]
Could you elaborate?
I don't see the mechanism for doing so, especially through the ECB who's sharply criticized for "endangering the saver's money".
by Bernard on Sat Feb 4th, 2017 at 09:57:38 AM EST
[ Parent ]
I did not mean through the ECB.
But Germany has to recycle its surplus. Investments abroad would involve foreign exchange transactions.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Feb 4th, 2017 at 11:00:10 AM EST
[ Parent ]
I don't read the definition to include FDI, only open market purchases of foreign currency by the foreign currency reserve.

If the definition is as broad as you read it, it's completely redundant because surpluses must be recycled by accounting identity. So anybody who fits the foreign surplus criterion would automatically, by accounting identity, fit that broader interpretation of the foreign currency purchasing criterion.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 4th, 2017 at 11:14:17 AM EST
[ Parent ]
I don't see how it can. "Germany" doesn't make FX purchases in the open market, so far as I know. The ECBuBa might, but you can't distinguish a particular German FX flow in that. Also, the ECBuBa has some very valid reasons to buy USD, after it got caught with its pants down during the last almost-collapse of the eurodollar funds and had to be bailed out by the Fed. It would be irresponsible not to maintain a much larger prudential dollar reserve than it was doing pre-crisis.

None of which is to say that Germany isn't a currency manipulator, just that the definition doesn't really parse for individual members of a currency union. I'd argue that Germany in fact is a currency manipulator, and the whole point of the €-Mark, as the Germans saw it, was to be able to do such manipulations without buying foreign currency in the open market to support it, something the Germans have a sentimental aversion to.

But I also have very little sympathy for the Americans' whining about other countries' currency policies. The Americans are free to discount the dollar at any time; they do not need permission from the ECBuBa or the PBC to do so. But they don't want to do that, because the tribute they collect from the colonies is settled in USD, so doing the obvious, easy thing to counter BuBa or PBC shenanigans (real or perceived) would reduce the value of incoming tribute flows. So instead they posture and try to browbeat other people into subordinating their currency policy to the US (even further than is already the case).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 4th, 2017 at 11:09:59 AM EST
[ Parent ]
We've been writing intent out of our criminal laws, especially at the federal level, for over 20 years now.  Makes it easier to feed the Prison Industrial Complex.
by rifek on Fri Feb 3rd, 2017 at 10:34:48 PM EST
[ Parent ]
On this I agree with Krugman. From the article linked above:
The travails of the euro system may add to poor European perceptions. But there's no clear relationship between the problems of Germany's role within the euro and questions of the relationship between the euro and other currencies.

And may I say, what is the purpose of having someone connected to the U.S. government say this? Are we going to pressure the ECB to adopt tighter monetary policy? I sure hope not. Are we egging on a breakup of the euro? It sure sounds like it -- but that is not, not, something the US government should be doing. What would we say if Chinese officials seemed to be talking up a US financial crisis? (It would, of course, be OK with Trump if the Russians did it.)

So yes, Navarro has a point about Germany's role within the euro. And if he were unconnected with the Bannon administration, he would be free to make it. But in the current context, this is grossly irresponsible.



"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Feb 8th, 2017 at 11:09:44 PM EST
[ Parent ]
We will have to see if Trump's promise to raise 3 billion for infrastructure bears out.
From Italy's perspective it is good to have Germany's trade surplus highlighted repeatedly, hard and often.
As it should be, whomever the voice belongs to!
Right now it's treated as an inconvenient truth no-one wants to address, yet it's a vital ingredient in u derstanding why the currency has become a cage instead of a convenience for so many in Europe. The 800lb gorilla...
When Prodi took us into the Euro, he promised Italians a day less working and an extra day's pay in order to effect the change without recourse to referendum.
The next day they paid double for a coffee, fast forward to now and we've lost a quarter of our manufacturing and have youth unemployment at 40%. Of course we're happy Albania's economy is growing and all, but from Italy's perspective it's our lunch they're eating.
I have zero illusions Trump is doing this from the goodness of his heart. Europe's disintegration as Superstate big enough to punch weight with USA, China, Russia seems inevitable at this point due to the incredibly poor calibre of Eurocracy we've been able to manifest. If you hate your currency as badly as most do here, something's seriously skew-wiff. If far-right parties are sprouting up like mushrooms, idem.
Unfortunately worthy, capable statesmen don't grow on trees.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Fri Feb 3rd, 2017 at 12:11:37 PM EST
So I think we should lay out the scenario explicitly, and see what our attitudes towards it are.

To me, Italy is a clear target for this anti-Euro talk. Because Italy's economy has been hit particularly hard by the German Euro, and alone among the major Euro economies, there is a major political party which has made a lot of hay on the Euro issue, which may well be in government soon.

So what is the Trump plan, insofar as there is one? Drive a wedge, sure. Encourage Italy to leave the Euro? What can they offer as enticement? From a trade point of view, what they want is for the EU to disintegrate, so that they can make leonine treaties with each member state. Getting Italy out of the EU seems a long shot. But driving the Euro up against the dollar, by picking off the weaker economies, is a probable Trump goal.

As we all know, re-balancing the euro area through fiscal transfers would fix the problem, and the frictions. This requires a change of government in Germany, but would a Schulz government be any better?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Sun Feb 5th, 2017 at 07:13:55 PM EST
[ Parent ]
Do we know of any Bannon Italy connection? Because otherwise I don't think Italy would show up on anyone's radar. But in general there would be very little they could do without the whole US government system being behind it. Well they could send tanks to Frankfurt I suppose. Otherwise they could offer Fed support if the Fed was game or financial backing if Congress is onboard. None of this seems like it would play well to a domestic audience. For the congress case the Brandon faction would first have to capture the media narrative and redeclare the EU to the USSR-west. The only foreign country you can just hand money over in the US under normal circumstances is Israel. The Fed route is a bit more plausible but seems only relevant for small countries like Greece. The idea is that you could refuse to clear transactions from new GreeceCB but you can't really do so if they go over the US payment system. Though the logistics of this seem more complex than what I would credit the Trumpkins with. So in conclusion I don't think they can do all that much.
by generic on Mon Feb 6th, 2017 at 09:11:20 AM EST
[ Parent ]
Europe might possibly be saved if the euro is trashed, Maastricht is rewritten, or the ECB were made transparent.
Unlike LePen, 5*MV is willing to threaten a referendum to exit the currency_in order to reform it -and junk austerity-_
And only if that doesn't make Germany rethink its beggar-my-neighbour attitude, then -and only then- stage 2, Italexit.
What Trump's doing is accelerating the EU's demise, as the quality of leadership, and the revolving door between lobbyists and parliamentarians have made the EU's unsustainability -as is- inevitable.
In some ways the sooner this happens the sooner we can build version 2.0, with the necessary precautions baked in to avoid the problems we suffer from currently.
Right now it's a logjam.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Tue Feb 7th, 2017 at 12:12:50 AM EST
[ Parent ]
As Krugman said, Trump is, of course, a moron.  He's simply looking to pick a fight with Germany in service to harming the EU.  Not because Trump particularly cares or knows shit from Shanghai, but because Bannon knows how to prod him.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Feb 4th, 2017 at 11:17:30 PM EST


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