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D_w

according to http://www.economist.com/news/economic-and-financial-indicators/21573996-trade-exchange-rates-budget-balances-and-interest-rates%20

1. our project CA surplus will be 5.3%, for older data and stock see the epp link above

2. please also take a look at Denmark, Netherlands, Sweden, Switzerland, Luxembourg, and Norway as an oil-special. They are all like us.

3. Finland has a temporary Nokia problem, the baltics, PL, CZ are growing, their deficit is healthy, given this and their debt.


AS discussed, or shall I say battled between the Whelan cited above, and the Citi Buyter on one side, and Sinn, many other DE econ profs on the other side, this CA surplus is a drain on Germany, especially given the extraordinary low rates on TARGET 2.

All that capital should yield much more, if invested at home, according to the classical theories, or at least a little more at the ECB.

Bagehot described the job of the central bank once as:
“Lend freely at a high rate, on good collateral.”
http://research.stlouisfed.org/publications/es/08/ES0827.pdf


Whelan now acknowledges that this will be repaid, even by a Cyprus.

Sinn, I think, had to realize, that we actually don't need it at home, give the sustained surplus.


Given that I exhausted the 2 links already, I stop here for the moment with the suspicion that Nick Rowe is some pretty intelligent free rider, getting all the material for some advanced econ PhD program delivered here freely : - )

Nick,

this is why I point always to this net ZERO accumulated CA position until 2002 of Germany. What we did to not scratch the 3% buoy a 5th time, also suddenly resulted in substantial CA surplus, something, most of us didnt realize until about 2008.

I think, I have a partial explanation, attributing about 40% to your way of view, but only with including some changes in the tax code, come to some acceptable 70% explained, but any attempt to explain this here, would be a nightmare. This question, looking on FX rates and CA surpluses over dozens of years, US, JP, DE, EU, was actually what brought me to macro, reading all the Krugman, Mundell stuff, just to find out, that my own, prior, intuitive and quantitative answers were much better.

In a second sentence, you will probably feel more like to your point, of course, there is some elasticity with respect to relative wage rates. But the import from the south has improved somewhat inbetween absolut and relative, and what was rising was the German export surplus to not even outside Euro, but even more to outside Euro, even against a rapidly rising Euro FX. Sarrazin "Europe doesnt need the Euro" has more details to this as well.

It is this age old difference between those just relying on macro data, and those who ask "what specific" : - )

FWIW, I think this discussion has cemented my conviction that Germany needs to leave the Euro ASAP.nGiven the political realities of what everyone is willing/able to do, where does it all end otherwise? Europe lurching from crisis to crisis with catastrophically high unemployment in much of the periphery for the next 20-30 years? Not a good option, and I fear will end in violence.

"I addressed the 4 times scratching the 3% deficit buoy already. I don’t know what to add, ... Scratching a buoy is not an excuse for others to rampage through the whole harbor."

It might be useful for you to understand the contradictions in your position before you post further.

1) On the one hand, you have insisted that rules are rules, and those who sign treaties are expected to abide by them. That's a logical position.

2) On the other hand, you're quite happy to ignore occasions when Germany favoured (a) making exceptions to rules, and then (b) destroyed (with France) the enforcement mechanisms designed to ensure that rules were respected.

Now, some in Germany (may we include you among them?) are upset to find that (a) the rules have not been respected, and (b) that this is presently not to the German taxpayer's advantage.

There were many who warned German and French politicians that abrogation of the treaty rules was dangerous and shortsighted. Everyone who understood the fiscal problems of the lender of last resort in a monetary union without a fiscal or banking union became quite shrill before the SGP was watered down (the ECB included, which put its Governor in direct conflict with leaders in both Paris and Berlin -- a tricky position to be sure.)

This was not the only sharp warning that was ignored. Many had previously noted that watering down the 60% Debt/GDP limit (to allow countries like Italy, Belgium and Greece to adopt the Euro) was dangerous at best. We see now that they were optimistic. Germany's leaders were consistently on the wrong side of history in these decisions.

I therefore do not understand what in the present circumstance you find unfair for Germany.
1) Do we agree that successive German governments knew the rules?
2) That they both ignored them and helped create exceptions to them?
3) That many warned of the risks to the Euro system that such decisions implied?
4) That Germany was instrumental in destroying the treaty's original enforcement mechanism?
All that I understand of your position is that *presently* it has not worked out in Germany's (or anyone else's) favour. Yep, that's a shame. However, the EU is a democracy....and its citizens (north and south of the Alps) are getting the governments they deserve.

genauer,

1) Hmmm, according to Eurostat, German GDP in 2012 was 2.64 trillion euros, and trade surplus 188 billion euros - that's 7.1% of GDP, so the current account balance should be in the same ballpark (I assumed it would be a bit higher than the trade surplus, given Germany's significant net foreign assets). I guess the Economist is using outdated projections or their formula is wrong.

2) Yes they are like you, which makes the situation for the South even more difficult.


So, the CA is a drain on Germany. Well, that would certainly be a huge surprise for the IMF. Looks like your (or most German economists')economic views are pretty far from the international mainstream, so I officially give up.

Patrick,

"I think this discussion has cemented my conviction that Germany needs to leave the Euro ASAP"

I always though they they should, but can't. But now after talking to genauer I'm beginning to think (or hope) that they actually might.

Some former members of the ECB Governing Council are pointing out another serious contradiction between the rhetoric of "Northern" Eurozone members and their actions.

Specifically, their current position (as I understand it) is that Europe really needs a stronger banking union, with national banks held to common regulatory standard, backed by a common lender-of-last resort and a common deposit insurance scheme.

Having said that, their actions (in Ireland, in Spain, in Greece and in Cyprus) are to avoid sharing the costs of deposit insurance and to limit access to the lender-of-last-resort function. The net effect is to destablize banking systems in those economies which can least afford it. While this benefits private banking interests in northern economies, the overall economic costs are high.

Patrick,

maybe, following the example of Bob Smith, I am getting a little cocky here myself.

Before 1990 Western Europe was held together by 2 iron clamps. The fear of the Russians, and that France and Germany might get at each other again.

“The Russians come” means now : roll out the red carpet, the kyrillic menus, FAT wallets come, and here around they behave pretty neat, and have beautiful daughters. 2 dozen city employees especially assigned to keep them happy and spending: - )

Who is now afraid of the traditional France vs Germany, that we might do more than to show each other the tongue?

Soo, at least from 2000 on, everybody went back to the old traditions, the usual European / national infighting.

We looked a little bit at that, scratching our heads, you know, we are a little old fashioned, believe in treaties and agreements to be kept. Sometimes we are a little bit slow in the head, it takes some time, before we take up the latest fashion.

And we got always told: you are so serious, disciplined, no humor, no emotions, no drama.

Terse, calculating, always worrying.

Now, we are learning, listening, we want to become a little more like you, just as a sign of our wish for cultural community, and do a little of that by ourselves, have some public parliament battles about foreign policy, etc.

As a short intermezzo for Dr_w (you should decide, what I should use)

and Simon,

You are mixing up trade and current account (CA). Our trade was always positive since 1952, but we spent it all on paying down the London 1953 debt, paying off Israel, some 250 b forked over to the EU. And, to be fair, since at least the end of the 1960ties, the most to spend more time in the Sun of the South, German beer bellies competing with English, who is the first to put his towel down in the morning : - ).

So the cumulative net position (CA) was ZERO 1998 – 2002.

To this endless “Germany needs to leave the Euro ASAP” and often more aggressive versions of that.

Once you got to hear often enough from others “We are like Malaria, once you got it, you will never get rid of it”, we also did some checking. To get rid of anybody else is easier than us : - )
On what grounds ?

Cyprus, Greece, Ireland, much easier.

Just in case, according to Bundesbank's estimate, the 2012 CA surplus was 185.4 billion euros - that's exactly 7% of GDP. That settles it.

genauer,

"Cyprus, Greece, Ireland, much easier."

The country, which would benefit the most from leaving the euro is probably Italy, followed by France. And they actually might - once the euro exit becomes a practical option.

Dr_w,

what do you exactly believe to "settle" here, with a 8.3, a 5.3, a 7 percent, all "estimate" collection?

Did I miss anything here?

Genauer: You've confused me with someone else....I'm not talking about current accounts or trade balances.

Obviously the Bundesbank gives the most accurate estimate.

If you look at The Economist's table, it first gives the absolute number, which is taken from the Bundesbank, and then CA as a percentage of GDP - which is apparently a "forecast" and comes from a different source.

Simon,

this was in some cross over with your earlier comments, and me aborting some sideline. I am trying to keep this here coherent.

Before I act out a little bit more of my inner bad boy: - )

Simon, Nick,
did this ever happen to you, that people come, after you are just a little happy to have turned around your own Canadian shite, that folks come, and complain, that it is not all this shiny white city on the hill, immaculate perception, impeccable, infallibe?

Somehow this happens so often to me.

All: check Simon's 11.06 comment. I just fished it out of spam.

Genauer: Again, you are mistaken; check your facts. I have said *nothing* about trade or current account deficits.

Thanks for pointing out you have been trying to keep your argument coherent. Nonetheless, your remarks about shite and "immaculate perception, impeccable, infallibe" probably only make sense to you.

Simon,

It's Sunday night here.

Cyprus Update

There's some kind of drama over the fate of the ECB loans to Laiki and the President threatened to resign.

If you read it with German grammar in mind, it makes a little more sense. :) I think he is trying to say that Germans have fixed their problems, and other people are coming and complaining that the way that Germans have fixed their problems that seems acceptable to Germans (or at least genauer) is actually *not* acceptable. And that they are doing so with an unjustified level of certainty.

I find my position adequately reflected in my first sentence there, together with my subsequent explanations here.

And now, as promised, acting out my inner little bad boy, screwing a little bit with your minds:

I once worked for a high-tech company, listed on the NYSE with a few b revenue, but badly managed.

When the liquidator came, the upper management fled in their limousines, to the grin of the lower ranks, like me.

We signed agreements, according to the court, who made the appointment, and he made me whole. I like that.

He is really good at liquidating, sold other properties to our Russian partners, even created a few hundred jobs in Ingolstadt with that.

If somebody is interested, Nick Rowe knows how to contact me, to verify my accuracy, and to make contact, if somebody is interested.

Now, Dr_who,

Let us get the facts straight.

Germany does not owe one cent to Cyprus.
Cyprus wants a very generous 10 b loan from the ESM, and has to convince the largest shareholder, Germany, with a blocking share, that it will pay it back in full and on time.
Some recent information:

“Swedish tax-authorities made some comments on Cyprus:

[irish source link left here out for spam filter]

The short:
-It takes Cypriotic tax-authorities up to 2 years to reply to requests for information from Swedish tax-authorities.
-The estimated amount of taxes that are due in Sweden but held in Cyprus for the period of 2007-2011 is 11bn SEK

Sweden can, as not being member of the Euro-zone, decide to either lend money to Cyprus or not. Odds are that Sweden will offer Cyprus the same support as it offered and provided to Greece: Tax-collectors from Sweden to go there to help with tax-collection.”


Now, Dr_who, what do think Cyprus prefers,

The ECB and some Swedish tax collectors, or some Russian … collectors? Since you were so fond of playing the “Russian Card”.

genauer,

You know, I think I'll close the portal between our parallel universes.

Doctor_why,

that would be a pity, because after that blows over, and you reflect a little bit,

I could actually imagine that we to do some business together.

Probably VERY hard for you to imagine this night.

Cyprus Update

Wow! Now they are talking about a haircut on government bonds. This time the Troika has outdone themselves. Will they ever run out of creative solutions.

Wasn't the meeting in Brussels supposed to have a started a couple of hours ago? I'm seeing nothing resembling hard news on NYTimes, Reuters or Bloomberg. Most of the rumours (reported on Reuters) look like things that would seem to be rejected by Parliament (e.g. closing Bank of Cyprus, haircuts on small deposits.)

Looks like it might be a while yet before bank can open their doors in Cyprus.

Mandos; Thanks for the attempt at translating Genauer. Regarding the "And that they are doing so with an unjustified level of certainty."...Is he aware of the irony in statement? or is that something that you added? ;-)

Simon,

Kathimerini says the meeting started half an hour ago and the final proposal from the Troika is a 50-60% haircut on large deposits in the Bank of Cyprus (conversion to equity?) and a merger of the "good" Laiki with the Bank of Cyprus.

Actually, no - the meeting is expected to begin "in a few minutes"

D_w, I dont know anything about your business, but you seem to be a good guy

S Templar, your orphan

I very, very much hope that we will just laugh about this in a week,

BUT I am somewhat afraid of dead people in Cyprus.

Calm. No stupid moves.

Cyprus Update

http://www.reuters.com/article/2013/03/25/us-eurozone-cyprus-text-idUSBRE92O02920130325

There are no real surprises and no obvious problems with this plan, but we don't know all the details yet. Fortunately, the deal does not include a tax on deposits, so it does not have to be approved by the Parliament.

I guess it must be the end of this particular episode then.

However, I'm still a little bit worried about genauer's parallel universe - the last time I heard from him things were not looking good.

P.S. Though the deal does not specify it, the government says there will be a haircut (conversion to equity) of about 30% for unsecured deposits at the Bank of Cyprus.

D_w,

I am fine.

You, apparently, too, very good.

I was tired last night, I am presently working on some clarifications, shouldn’t take more than until in 2 hours, I have some other business, besides this blog, as well : - )

1. The 3% deficit rule

Apparently the meme “scratching the buoy” doesn’t cut it with people, who do not sail.

So, let’s try this explanation:

I do not know in detail how tax is collected in Canada, but here in Germany most of it is deducted with the paychecks and for corporations on a quarterly / monthly basis, dependent on the size.

The declaration for the last year should be sent in the following May, more complicated people like me have effective one year time.
That means that the Government has an estimate of the yearly tax collection, and therefore the national deficit, by maybe 0.4% GDP (gut feeling numbers!) at the End of the respective year, 0.2% half a year later. And the “real final” number” you have only some 2 years later.

Exceptions do apply.

I give you just one example. After the genial Irish financial supervision enabled some complete screw up of our Hypo Real Estate / Deutsche Pfandbriefanstalt (HRE / Depfa) and we had to bail out a systemically critically , kind of Fannie Mae, the German National debt went up by about 200 billion (with ca 7% GDP, in 2009, not to be sneezed at). But in fall 2012, they somehow “found” some 50 billion again there, reducing our consolidated 2011 debt by about 1.5%.

Now, what do you do, if you find out that, that the formulation of a rule is utterly impractical? Apply some 2 year retroactive property tax? Abandon ALL rules? Do some more fiscal tightening, of which we know now to be even more than sufficient?

No, you change the rules to be more practical, not even to speak of being actually “enforceable”.

And now so many folks are endlessly complaining about that.

We have in Germany now something like the 4th version of our stability laws, because people on the state/local level are as inventive as our southern neighbors, to play the text of the law. Like declaring higher teacher pay as “infrastructure investment”, with a straight face, that was a really good one. Chuzpe, Chapeau.

When you take a look at the http://epp.eurostat.ec.europa.eu/portal/page/portal/excessive_imbalance_procedure/imbalance_scoreboard
, you find that the “Government deficit” is not even part of the list anymore.
You also find, that some folks, like Belgium, were actually working towards the 60% debt target, in the good years, 1999 – 2007, others, like Italy under “conservative” Berlusconi, not one bit.

And, looking at wiki Stability_and_Growth_Pact, Stabilitäts-_und_Wachstumspakt, European_Fiscal_Compact, you find, that those acting honestly, like Belgium, are the reluctant ones to formally sign off on. And it is certainly not a 1:1 correlation, to be clear.

spam filter problems again, please eliminate doubles

1. The 3% deficit rule

Apparently the meme “scratching the buoy” doesn’t cut it with people, who do not sail.

So, let’s try this explanation:

I do not know in detail how tax is collected in Canada, but here in Germany most of it is deducted with the paychecks and for corporations on a quarterly / monthly basis, dependent on the size.

The declaration for the last year should be sent in the following May, more complicated people like me have effective one year time.
That means that the Government has an estimate of the yearly tax collection, and therefore the national deficit, by maybe 0.4% GDP (gut feeling numbers!) at the End of the respective year, 0.2% half a year later. And the “real final” number” you have only some 2 years later.

Exceptions do apply.

I give you just one example. After the genial Irish financial supervision enabled some complete screw up of our Hypo Real Estate / Deutsche Pfandbriefanstalt (HRE / Depfa) and we had to bail out a systemically critically , kind of Fannie Mae, the German National debt went up by about 200 billion (with ca 7% GDP, in 2009, not to be sneezed at). But in fall 2012, they somehow “found” some 50 billion again there, reducing our consolidated 2011 debt by about 1.5%.

Now, what do you do, if you find out that, that the formulation of a rule is utterly impractical? Apply some 2 year retroactive property tax? Abandon ALL rules? Do some more fiscal tightening, of which we know now to be even more than sufficient?

No, you change the rules to be more practical, not even to speak of being actually “enforceable”.

And now so many folks are endlessly complaining about that.

We have in Germany now something like the 4th version of our stability laws, because people on the state/local level are as inventive as our southern neighbors, to play the text of the law. Like declaring higher teacher pay as “infrastructure investment”, with a straight face, that was a really good one. Chuzpe, Chapeau.

When you take a look at the

epp.eurostat.ec.europa.eu/portal/page/portal/excessive_imbalance_procedure/imbalance_scoreboard

, you find that the “Government deficit” is not even part of the list anymore.
You also find, that some folks, like Belgium, were actually working towards the 60% debt target, in the good years, 1999 – 2007, others, like Italy under “conservative” Berlusconi, not one bit.

And, looking at wiki Stability_and_Growth_Pact, Stabilitäts-_und_Wachstumspakt, European_Fiscal_Compact, you find, that those acting honestly, like Belgium, are the reluctant ones to formally sign off on. And it is certainly not a 1:1 correlation, to be clear.

problems with the spam filter here

A few clarifications for yesterday

I became tired, and then I fall back into my German grammar and wording, and there was no point in trying complex explanations anymore. That is as it is, and I can’t change this.

1. The 3% deficit rule

Apparently the meme “scratching the buoy” doesn’t cut it with people, who do not sail.

So, let’s try this explanation:

I do not know in detail how tax is collected in Canada, but here in Germany most of it is deducted with the paychecks and for corporations on a quarterly / monthly basis, dependent on the size.

The declaration for the last year should be sent in the following May, more complicated people like me have effective one year time.

That means that the Government has an estimate of the yearly tax collection, and therefore the national deficit, by maybe 0.4% GDP (gut feeling numbers!) at the End of the respective year, 0.2% half a year later. And the “real final” number” you have only some 2 years later.

Exceptions do apply.

I give you just one example. After the genial Irish financial supervision enabled some complete screw up of our Hypo Real Estate / Deutsche Pfandbriefanstalt (HRE / Depfa) and we had to bail out a systemically critically , kind of Fannie Mae, the German National debt went up by about 200 billion (with ca 7% GDP, in 2009, not to be sneezed at). But in fall 2012, they somehow “found” some 50 billion again there, reducing our consolidated 2011 debt by about 1.5%.

Now, what do you do, if you find out that, that the formulation of a rule is utterly impractical? Apply some 2 year retroactive property tax? Abandon ALL rules? Do some more fiscal tightening, of which we know now to be even more than sufficient?
No, you change the rules to be more practical, not even to speak of being actually “enforceable”.

And now so many folks are endlessly complaining about that.

what is it with the spam filter. I thought I figured it out

A few clarifications for yesterday

I became tired, and then I fall back into my German grammar and wording, and there was no point in trying complex explanations anymore. That is as it is, and I can’t change this.

1. The 3% deficit rule
Apparently the meme “scratching the buoy” doesn’t cut it with people, who do not sail.
So, let’s try this explanation:
I do not know in detail how tax is collected in Canada, but here in Germany most of it is deducted with the paychecks and for corporations on a quarterly / monthly basis, dependent on the size.

The declaration for the last year should be sent in the following May, more complicated people like me have effective one year time.
That means that the Government has an estimate of the yearly tax collection, and therefore the national deficit, by maybe 0.4% GDP (gut feeling numbers!) at the End of the respective year, 0.2% half a year later. And the “real final” number” you have only some 2 years later.
Exceptions do apply.

genauer - sorry, only Nick or Stephen can rescue you. The comments are there, Nick will probably read this soon.

I give you just one example.

After the genial Irish financial supervision enabled some complete screw up of our Hypo Real Estate / Deutsche Pfandbriefanstalt (HRE / Depfa) and we had to bail out a systemically critically , kind of Fannie Mae, the German National debt went up by about 200 billion (with ca 7% GDP, in 2009, not to be sneezed at). But in fall 2012, they somehow “found” some 50 billion again there, reducing our consolidated 2011 debt by about 1.5%.

Now, what do you do, if you find out that, that the formulation of a rule is utterly impractical? Apply some 2 year retroactive property tax? Abandon ALL rules? Do some more fiscal tightening, of which we know now to be even more than sufficient?

No, you change the rules to be more practical, not even to speak of being actually “enforceable”.

And now so many folks are endlessly complaining about that.

We have in Germany now something like the 4th version of our stability laws, because people on the state/local level are as inventive as our southern neighbors, to play the text of the law. Like declaring higher teacher pay as “infrastructure investment”, with a straight face, that was a really good one. Chuzpe, Chapeau.

When you take a look at the eurostat excessive_imbalance_procedure imbalance_scoreboard (link left out for spam filter)

, you find that the “Government deficit” is not even part of the list anymore.
You also find, that some folks, like Belgium, were actually working towards the 60% debt target, in the good years, 1999 – 2007, others, like Italy under “conservative” Berlusconi, not one bit.

And, looking at wiki Stability_and_Growth_Pact, Stabilitäts-_und_Wachstumspakt, European_Fiscal_Compact, you find, that those acting honestly, like Belgium, are the reluctant ones to formally sign off on. And it is certainly not a 1:1 correlation, to be clear.

Frances, thanks a lot for your help !

Nick, Simon, please don't activate endless duplicates!

I will find my way around here, as always

I published the duplicates anyway, as a way of training the spam filter.

Thanks Stephen.

LOL,

maybe your spam filter now learns, that bad german grammar, and LONG text is a hallmark of integrity : - )

I shall feed him some Osswald Spengler

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