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.

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.

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.

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.

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}