4 ms·

Read again. I'm explaining the connection between exchange rates and the balance of payments. Nothing even remotely controversial. Macroeconomics 101.

tinco 8y ago
Yes, and thank you. I was asking a follow up question regarding your comments about EU vs US subsidy policy making.
- atlantic 8y ago
  > So are you saying wealth is distributed less socially in the EU than it is in the states? I've never heard that before but it could be right, I don't know the details of how countries contribute to the EU. I certainly have heard the moral arguments from Germany, as well as from the rest of the rich EU countries. What I'm saying is that, once you remove currency mechanisms which automatically bring into equilibrium the balance of payments between EU member states, you can have permanent trade imbalances between countries. German exports remain artificially cheap within Europe because they are Euro-denominated. So Germany keeps racking up balance-of-trade surpluses, which then allow it to go into the southern countries and buy up real estate and major companies, so that they become the effective owners of the country. Obviously they have a vested interest in maintaining the current system. > Are poor regions in the US effectively assisted by subsidies? I feel in the EU the main problem is lack of integration, for example if I design a product here in The Netherlands, it would be a lot cheaper to set up a factory in say Poland or Spain, but I'd be hesitant to do that because of cultural and language barriers. I suppose that's less of a problem in the US, though in the US distances are greater. There are quite a lot of factories in southern Europe, because salaries are much lower, but that does not really help the southern countries much, as the profits flow back north into their parent companies' countries. Obviously over time, salaries in the south will also tend to rise, hence the enthusiasm of Germany for an open-borders policy which floods the entire European market with cheap immigrant labour, thus holding wage levels low.

tinco 8y ago

Yes, and thank you. I was asking a follow up question regarding your comments about EU vs US subsidy policy making.

atlantic 8y ago
> So are you saying wealth is distributed less socially in the EU than it is in the states? I've never heard that before but it could be right, I don't know the details of how countries contribute to the EU. I certainly have heard the moral arguments from Germany, as well as from the rest of the rich EU countries. What I'm saying is that, once you remove currency mechanisms which automatically bring into equilibrium the balance of payments between EU member states, you can have permanent trade imbalances between countries. German exports remain artificially cheap within Europe because they are Euro-denominated. So Germany keeps racking up balance-of-trade surpluses, which then allow it to go into the southern countries and buy up real estate and major companies, so that they become the effective owners of the country. Obviously they have a vested interest in maintaining the current system. > Are poor regions in the US effectively assisted by subsidies? I feel in the EU the main problem is lack of integration, for example if I design a product here in The Netherlands, it would be a lot cheaper to set up a factory in say Poland or Spain, but I'd be hesitant to do that because of cultural and language barriers. I suppose that's less of a problem in the US, though in the US distances are greater. There are quite a lot of factories in southern Europe, because salaries are much lower, but that does not really help the southern countries much, as the profits flow back north into their parent companies' countries. Obviously over time, salaries in the south will also tend to rise, hence the enthusiasm of Germany for an open-borders policy which floods the entire European market with cheap immigrant labour, thus holding wage levels low.