Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Well, several things.

There is some inflexibility -although I would be prudent before stating that it is long-run inflexible. China may decide at some point that it will build some machines themselves. Or stop buying so many -then Germany would need the peripheral countries again.
But if the exchange rate was to double -and it may well be the order of magnitude, considering what the imbalances are- I'm not so sure that even short-run inflexibility would be so clear.

Now, imagine that this problem is not too big anyway. There remains another one: since Germany is determined to have a massive surplus, it needs to invest its savings abroad. Will it be all that happy to be facing a yearly depreciation of around 6-8% for the foreseeable future? After all, level of exports is not the obvious main target of a properly run economy. It may be that with its own currency, Germany's exports remain strong (although unlikely that they will be so strong, just look at when and how the trade surplus did open). But they would not be better off -certainly, savers would not be. And they are the ones that matter, as we well know.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Thu Nov 28th, 2013 at 04:53:44 AM EST
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