Kenneth, T. (2014) “The German euro is overvalued“, US/ Global Economics, Angry Bear Blog, 02 Δεκεμβρίου.
I keep telling people that the German euro is undervalued, but some folks seem not to believe me. (See the comments section from this post last year for an example.) But this is a really big deal. The dominant narrative about the eurozone crisis is that fiscally irresponsible countries like Greece were bringing the once-proud currency to its knees, and weakening the European project to boot. Meanwhile, the virtuous Germans keep on cranking out trade surpluses and have to bail out Greece, Ireland, Portugal, and Spain. And it’s pretty clear that the Germans believe this version of events.
Never mind that Spain and Ireland, for two, had budget surpluses prior to the crisis, or that Spain’s economy is five times as large as Greece’s. What’s going on in Greece is supposedly the true explanation for the eurozone’s problems.
Let me challenge that narrative that with a simple thought experiment. Instead of one euro, let us reason as if each of the 18 eurozone members had its “own” “euro.” Let’s begin by thinking about what creates the value of the current 18-country euro. We might include interest rates, inflation rates, growth rates, and trade balance, among other things, and of course expectations for all these variables. What we need to remember is that the value of today’s euro represents the averaged effect of all these variables in all 18 countries, rather than reflecting the economic conditions of any one of them.
Σχετικές αναρτήσεις:
- Turner, A. (2014) “Germany’s Secret Credit Addiction“, Project Syndicate, 10 Νοεμβρίου.
- The Editors (2014) “What’s Bad for Germany Could Be Good for Europe“, Bloomberg View, 04 Noεμβρίου.
- Wren-Lewis, S. (2014) “Why the Eurozone suffers from a Germany problem“, Mainly Macro Blog, 26 Οκτωβρίου.