Posted on 10/31/2013 2:31:22 PM PDT by Rusty0604
The chart below showing the portion of GDP generated through net exports by select group of trade surplus countries is well-known to most. Except, it seems, to the Treasury. Apparently to Jack Lew's henchmen it comes as a complete shock that Germany's exports account for 41.4% of GDP - 50% more than traditionally evil "mercantilist" China.
It is also a complete shock to the US Treasury that the current layout of the Eurozone - the same Eurozone that the Fed has stepped in on numerous occasions to bailout, common currency and all - was simply to facilitate German exports to fellow European countries.
Which is probably why, after years of saying nothing, in its semi-annual currency report released yesterday and "employing unusually sharp language, the U.S. openly criticized Germany's economic policies and blamed the euro-zone powerhouse for dragging down its neighbors and the rest of the global economy."
You see it was all Germany's fault.
From the Treasury's report:
Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy.
Ireland, Italy, Portugal and Spain are all now running current account surpluses as import demand in those economies has declined. Thus the burden of adjustment is being disproportionately placed on peripheral European countries, exacerbating extremely high unemployment, especially among youth in these countries, while Europe’s overall adjustment is essentially premised on demand emanating from outside of Europe rather than addressing the shortfalls in demand that exist within Europe.
The WSJ adds:
With the latest report, the Treasury Department has now criticized the world's three largest economies after the U.S. for their economic policies.
The focus on Germany represents a stark shift in the Obama administration's economic engagement with one of its most important allies. Since the early stages of the euro-zone debt crisis in 2010, U.S. officials often avoided public criticism of Germany given its central role in keeping the currency bloc intact. President Barack Obama and his top officials worked carefully behind the scenes to prod Germany without antagonizing it publicly.
Why the US would scramble to antagonize a Germany which as recently as a week ago was shocked to find out the NSA was spying on its beloved Angela Merkel is a mystery but apparently now that the fiction that Europe is "fine" and nobody can criticize it has ended and is no longer necessary because Spain is, in its own words, recovering, it is fair game to throw Germany and all other nations that dare to export better and more competitive goods and services than the US. under the bus. Because, you see, unless every "ally" of the US has the same "growth" model of internal consumption funded by titanic amounts of debt, be it household, corporate of sovereign, and is in the same insolvent boat at the end of the day as the US, they deserve to be spat upon.
Which also means that the reverse is also true and Germany can stop pretending that the US is some paragon of economic growth or stability. And unlike other painfully impotent US "allies" (coughfrancecough) whose eagerness to engage the US would go as far as summoning an ambassador for a brisk walk along the Champs Elysees, but never farther, Germany is in no way afraid to speak up against the former global hegemon, whose "reserve" status is evaporating by the day. Here is Germany response again via the WSJ:
"The trade surpluses reflect the strong competitiveness of the German economy and the international demand for quality products from Germany," the German Economics Ministry said in a statement Thursday, responding to a report from the U.S. Treasury published Wednesday that bluntly criticized Germany's economic policies and blamed the euro-zone powerhouse for dragging down its neighbors and the rest of the global economy.
"The U.S. government should critically analyze its own economic situation," said Michael Meister, a senior lawmaker and close ally of Chancellor Angela Merkel, criticizing the high debt level in the U.S., which "doesn't just unsettle [the U.S.], but has negative effects on the global economy."
"The German economy is competitive, with record-high employment—so it's really not understandable why we're being blamed for this success," Mr. Meister added.
It is quite understandable: Germany is refusing to adopt the principles of the Fairness Doctrine and alongside that, revert to the teachings of those great philosopher-thinkers Marx, Engels, Lenin and Stalin.
The Economics Ministry said the country's domestic economy is the main pillar of its growth, noting that both investment in Germany and consumer demand are increasing.
It also said the U.S. criticisms are at odds with the International Monetary Fund's stance: "Furthermore, the IMF also doesn't see economic policy distortions as the basis for Germany's trade surplus."
The report also provoked strong reactions from European economists. Holger Schmieding, chief economist at Berenberg, denounced the accusation that Germany is pursuing a beggar-thy-neighbor policy as "nonsense," given the strong euro and a fall in Germany's trade surplus with the euro-zone over the past five years.
"The German export growth story is mainly in emerging markets like China, the implicit criticism that Germany should export less and consume more—there I have my doubts because [European] periphery economies don't have products Germans would consume," Mr. Brzeski said.
Naturally, this is all just high-level political bickering, however unlike the Syrian debacle where Obama was schooled by the former KGB agent, the US president is dangerously close to antagonizing whatever pillars of support in the "priced to perfection" western world he has left.
Still, the last laugh will likely be Germany's. Following media reports that Germany is considering granting asylum to Edward Snowden, Germany's politician and member of the Green Party Christian Strobele moments ago sent out the following picture from his visit to Russia, alongside Snowden.
Because what better way to unite the rest of the world against the former Globocop that is the US, than to show that anyone who is terrified ot spending one extra day in the formerly great nation, can feel safer in Hong Kong... or Russia... or Germany... or increasingly more places that just want to tell America "enough." Finally, if and when Germany, Russia and China all sit down and finally agree to the new and improved trilateral alliance, that's when things will finally get exciting.
Really sad that the financial and moral state of the USA is so degraded that it can’t even criticize the social market economy properly, especially from any sort of high ground.
The Germans prolly laughed themselves silly before giving the smackdown!
Actually....Marx was a big supporter of Free Trade
Germany and other nations have realized Free Trade does not work....and having a trade surplus is much better than a trade deficit
Wonder how much Germany owes Communist China?
It’s time to get rid of Free Trade Communism. It does not work...and...when folks like Al Gore, Nancy Pelosi, Barack Obama, George Soros...etc...all support Free Trade...that should tell the lowest two digit IQ it does not work
We cannot compete with StupidNomics. Countries will protect their own economies...foolish ones do not
But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade. -Karl Marx
http://www.marxists.org/archive/marx/works/1848/01/09ft.htm
“...Germany’s exports account for 41.4% of GDP - 50% more than traditionally evil “mercantilist” China.”
That’s from manufacturing products. The key to wealth of any country is the ability to manufacture.
Only 12% of the US economy is based on manufacturing. And of that what percentage gets exported to other countries?
I give partial blame to the labor unions for killing our manufacturing. Look what they did to our steel industry.
We started exporting our manufacturing not long after WWII.
Actually, that is said by people who don't know squat about Marxism, or free trade, for that matter.
There are more unions in Germany than the U.S.
That must be why Marxist nations have historically allowed their citizens to trade freely with whoever they wanted.
See my post #5.
That’s true, but in Germany union membership has been dropping for the last decade or so and Germany has made some labor reforms that other EU countries didn’t. Long holidays, early plush retirements and other perks are some of the things that got Greece into trouble. Then they want the Germans to bail them out.
This shows just how far off base conservatives have gotten. I like America, not because it is a country called America, but because Americans and their government respect individual liberty. A free person doesn’t need permission to use their property as they see fit and trade with who they’d like.
The nationalists in America like America, even as it tosses them into the oven. That’s nuts.
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