Because, in a high-growth world economy, there’s feck all evidence that a structural budget deficit is necessarily a bad thing. Believe it or not, that money goes into investment in education and infrastructure, not caviar, cocaine and hookers.
Indeed. It is inefficient and presumptuous to do otherwise.
You are incorrect. The countries that ran surpluses and accumulated reserves like China are now holding all the cards. Even little Singapore, a country smaller than Northern Ireland, with no natural resources, accumulated an SWF which it has used to buy stakes in UBS and other western blue chips.
Meanwhile, debt monkeys in countries like Australia pretend theyre rich by flipping houses and saving nothing. Im not at all surprised, that Lee Kwan Hew called australians white trash, some years ago.
I think you’re wrong about Australia. Unlike the US and Europe, but like Canada, Russia and Brazil, they are full to the brim with natural resources are are doing very well out the commodity rally. The last three have seen record all time highs in their stock markets in recent days. In contrast Western Europe and the US are relying on bullshit called intellectual property, a fig leaf for SFA.
When Europe talks about relaxing rules, it is always from a position of weakness. Europe’s growth is perennially anaemic and you’re only seeing the start of the process of rule relaxation, designed to appease chronically underperforming mediterranean economies.
When that happens, international confidence in the Euro will be undermined. Since Europe is a net importer by a long way, that will stoke inflation higher, forcing interest rates higher leaving Germany in particular to rue the day it ever agreed to hitch its currency wagon to those highly productive and hard-working mediterraneans. Especially if Sarkozy and Berlusconi, who have already agreed to join forces against the ECB manage to get Zapatero on side.
I think the Euro has reached a cyclical peak, so anyone who has diversified out of Eurozone assets will be well rewarded over the next five to seven years.
Whats that got to do with their running or otherwise of a deficit?
Not quite Stingy…
Top Ten Surnames in Melbourne’s 2008 White Pages (might be a good trivia question for anyone running a pub quiz )
#2 Nguyen (Vietnamese)
#7 Singh (Indian)
#9 Lee (Chinese)
#10 Tran (Vietnamese)
Europe is a net exporter and in spite of Australias long running commodity boom it runs a trade deficet.
According to Eurostat, Europe now has an external trade deficit which is worsening. For the Eurozone, it was 2.3bn euro in March 2008 compared with a 7.5bn surplus in March 2007. For the EU27, it was a 20.7bn deficit.
My phrase “by a long way” was misjudged. For now.
The asians are holding their currencies artificially low against the euro, causing europe to have a trade deficit with them. They cant do that forever and will have to revalue sometime in the next few years which will cancel our deficit.
I only brought up the point about australia because Geckko is an australian whos coming in here telling us the EMU is crap, we should be running deficits, running surpluses is “inefficient and presumtuous” etc and all his other pompous windbag BS that he read in the Murdoch propaganda machine.
Regarding the trade deficit, all EU countries are not equal, from the report linked to above:
My feeling is that the UK is becoming the ‘sick man of europe’, dragging down overall EU performance.
As the UK have their own currency, their defecit is less of a concern to europe than the eurozone deficit. In this case, the Spanish defecit is a big worry.
Having said that, I’d like to see the breakdown excluding intra-europe transfers (i.e. how much of Spain’s deficit is as a result of imports from outside the eurozone and how much is from other eurozone states).
Spain, economically speaking, is another Ireland - massive property boom, massive borrowing, massive imports.
I’d reckon spanish imports will drop like a rock when they realise where their economy is going.