Global imbalances: the debate
As I told you before, the topic that interested me in this debate was the evolution of global imbalances in the balance of payments, a topic that was very popular at the beginning of the century, when China had become, with its large surplus, the number one enemy of the United States, as Japan had been before. At the time, that is, when I was writing this , this graph went a lot:
very "mamma them Turchi!" (ie "the Chinese"), from which it seemed that China's surplus would explode, naturally because it was drugged by an undervalued exchange rate (it could be said to China). The chart was a bit dishonest, though. The most correct one was expressed not as a percentage of national GDP, but in billions of dollars:
and the picture that emerged was very different: 400 billion dollars were indeed 10% of the Chinese GDP, but they were also less than the 700 billion dollars of US deficit. It was therefore a little difficult that the second deficit, the US one, larger and more pre-existing, had been caused by the first, the Chinese one, smaller and later, as instead they wanted to believe, thus placing the burden of the necessary corrective measures on China. .
The hypocrisy of this "quia nominor leo" struck me enough, so much so that at the time I closed my article in China Economic Review with these phrases (which I reminded you here today): "The supremacy of the United States generates a growing demand for dollar-denominated assets, that is, a growing foreign debt of the United States. If we look at them in this perspective, the current imbalances would be solved in two medium-term developments: the development of Asian financial markets and the spread of the euro as a means of international liquidity [ in order to direct part of the international demand for safe financial assets towards assets denominated in yuan or euro ]. The second development, however, must deal with a self-evident truth, namely with the fact that the euro, just like the dollar, it cannot circulate in the international monetary system if it is not injected into it! And the counterpart of a net offer of the euro to the rest of the world is u net demand for goods from the rest of the world, ie a trade deficit. In turn, the latter cannot manifest itself in an economy [ the European one, Ed .] That continues to grow below its potential. In other words, in order to contribute to the solution of international imbalances, Europe, instead of passively adapting to the debate within the United States, joining the American demand to revalue the yuan, and engaging in a battle whose significance and outcome are equally uncertain, he should simply find the courage to grow up! Europe is the second pole of the world economy, its faster growth would certainly make a contribution to solving the problem of global imbalances ".
Which was then a way of saying that the Eurozone, which thanks to its inherently deflationary dynamics was the black hole of world demand, as we have illustrated for example here talking about sechiular staghgnieiscion , would also become a source of imbalances, not wanting or being able to be the solution.
Of course it went exactly as I wrote and as I told you today:
the imbalances were recomposing themselves starting from 2009, but then when not the truth but austerity appeared, China passed the baton to the Eurozone as a counterpart (in surplus) to the US deficit.
Before commenting on the last piece of the graph (which is obvious: the "pandemic" shock has given new polish for the known reasons to Chinese net exports, which had dropped to zero, causing a further dip in the US deficit), I would like to point out that there is genius in the obtuse arrogance of the "programmatically profound people", as Savinio calls it.
Wasn't Rising Sun enough to show how Americans cook the surplus country of the moment? The Japanese in that film are very, very bad, but the film does not explain their real fault: it was that of being in surplus in the face of a US deficit (and this was resolved with the Plaza agreements , made "to counter the persistent appreciation of the dollar "- read: to force the yen to revalue, and resulting in the Japanese lost decade ). It was not enough a tir of literature on how bad China was that did not revalue the yuan. Actually, Germany absolutely wanted to rise to the role of villain (i.e. a surplus country) on duty …
It is not known whether to cry or laugh: we know what the answer was. Are you selling us too many cars? And then as if by magic we realize that your cars are polluting , and we don't buy them anymore (in addition to uncovering a few altars here and there ). There are also mischievous characters, experts in #aaaaaggeobolidiga, who support in 2022 what we supported in 2017 (and before that in the sunset of the euro ):
and today they talk about proxy war and similar awanaganate. But the point is one and only one: if you want to understand who will get hurt, follow the money . Four decades of recent history tell us that he will be the net exporter of the day (the net importer, that is, the buyer of last resort, is always the same).
We would now have to think about how it will go forward.
Of course, when Germany's turning point grìn , the grignudyl we talked about here , hinted that Germany had had the good idea of converting to green technologies by succumbing to its innate Drang nach Osten (that is, for you who are now leaguers, so simple people: throwing themselves into China's hands, a bit like Conte was doing here), something had to be done. Do you like Chinese (or Chinese-controlled) rare earths so much? And now shale gas becomes quite essential for you. Things that happen. Those that "the euro is irreversible" (which I agree on: my doubt is whether it is sustainable …) should also explain to us whether Europeanism and Atlanticism are compatible, because the current account graphs say no, so much so that the hegemonic power of the Atlantic Pact is taking the hegemonic power of the European Union as sganassons. When in doubt, I would go in alphabetical order: Atlanticism first. Then, there is a bit of Europeanism left over, because I am a little wary of these Europeans who have not studied history and do not want to study economics …
Graphs, as Comrade Lenin said, have a hard head, but they also give a lot of satisfaction to those who can read them, as I think I have shown you.
And now I leave you: tomorrow Abruzzo, that is sea (in the morning) and mountains (in the evening). The most beautiful region of Italy, and if a Florentine tells you so, you can believe it …
(… yes, in the best of all possible worlds it would be so nice to recover some strategic autonomy, without hitting anyone, but perhaps going beyond the simple realization that being with the winners is better than being with the losers – because the sandal with the sock leads inevitably to defeat! But is it possible? We will talk about it at goofy11 with interlocutors that you will like …)
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2022/06/global-imbalances-il-dibattito.html on Thu, 30 Jun 2022 21:58:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.