Pettis, who says he is a China ‘expert’ - and I’ll accept his word on it, does not criticize the appalling behaviour of corrupt producers and politicians in China as they pay subsistence wages, steal patents, cheat on copyright, subsidize energy costs and exports and dump their s*** into their environment. If we did this in Europe we would be ‘competitive’.

The Blanchard paper is a tad worse. This guy is well regarded, so he is likely to be heeded. If this was an undergraduate term paper I would give it a D-. Someone above accused him of being a High Priest of something or other. How about the country parson of Ballygobackwards?

If you have access to a spreadsheet plot a couple of graphs. Aggregate economic output at x% pa. for 69/x = 20, or whatever. You need to borrow money (Permagrowth economic Model-in-Use) to ‘grow’ your economy. Now overlay a plot of Debt (Principal + interest) that has to be generated in order that your ‘growing’ economy can pay back. You set the initial values for Y and P to be the same. You can mess about with the value for r. Watch the divergence!

Now please explain to me how we are going to be able to generate the surplus to pay back our debts - absent inflation, Jubilee or default. We cannot! Its physically impossible.

Modern economic theories are a set of - somewhat elegant? - logical arguments, which are accused of being ‘Laws’. Now we know these logical arguments do indeed work in theory. But, and this is the rub: do they work in practice? I reckon not.

You CANNOT continue to expand exponentially in a finite field. You may in theory; but I should not like to try it in practice. You will get a most disagreeable surprise. We need a replacement economic Model-in-Use, (Annual Aggregate Declension) - but who in the economic community has the intellectual testicles to compose and promote this?

B Peter

The reality is if Germany’s population is declining it doesn’t really need to grow. It has a mature economy with great infrastructure, public transport and the 2 most recent cities I have been in (Cologne and Nurnberg) were clean and very attractive.
As Jto points out, not good for the developed world but for now we can rely on the US. It’s a bit rich that we should be asking the prudent Germans to bail out the rest of us. I understand their irritation, I am a bit Germanic in my approach to saving and spending money. During the boom while much of the population bought houses they couldn’t afford and everything else on credit cards and personal loans we as a family continued to only buy things when we had the money to do so. It meant on the face of it we had a lower standard of living than the Jones but I’m pretty glad we did it now. It doesn’t make me want to bail out the spenders.

I would turn the question on its head - Germany is going to be an attractive place for emigrants from other EU countries. What is going to stop the talent from flocking there?

number of births in 2008:

—-Germany: 682,514 , Ireland: 75,065

number of deaths in 2008:

—-Germany: 844,439 , Ireland: 28,192

births as a percentage of deaths in 2008:

—-Germany: 80.8% , Ireland: 266.3%

percentage of population aged 65 plus in 2008:

—-Germany: 20.4% , Ireland in 2008: 11.0%

projected percentage of population aged 65 plus in 2026:

—-Germany: 30.8% , Ireland: 14.2%

projected change in population of working-age between 2008 and 2026:

—-Germany: -21.4% , Ireland: +25.3%

With such demographics, where on earth is growth in Germany going to come from? The answer is: it isn’t. Does it matter? Well, to some extent clearly. It would be much better for aggregate demand in the developed world if Germany’s population and economy were growing. But it is much more important for the developed world that the U. States’ population and economy be growing. Fortunately, that is happening and likely to continue
happening. The U. States’ demographics are far more similar to Ireland’s than they are to Germany’s. Not surprising, therefore, in 2009 Q4, the U. States economy grew at an annualised rate of 5.7%, while Germany managed 0.0%. That is going to be the pattern for decades to come.

ECB loans to Irish banks peaked at over €130 billion in June 2009, up from €88 billion in December 2008. This was equivalent to over 21 per cent of total Euro system lending to institutions in the Eurozone, up significantly from an average of 6 per cent in 2007, according to the ESRI.

Other PIGS were likely to have been also deep in the trough.

More information can be found here: http://www.iiea.com/events/globalisation-and-financial-integration

To register for this event call Shane on 01 874 67 56

He is very astute as he notices inflation has been used in the weaker countries, to counter balance German over production and over investment. That is more or less how he puts it. He then seems not to know that Germany has had to subsidize the ossis at enormous cost. That would be a local version of a PIIGS! East Germany has been brought up to close to west German standards. He also does not appear to know that Germans are very well paid workers! He advocates increases! China and Germany in the same sentence…. wow!

But he is correct: “Asking the trade deficit countries to leverage up to stimulate demand is counterproductive and would ultimately just postpone the necessary adjustment. ”
He discusses the likely future in China well.

I suppose he is trying, as he says to make a fairer balance. It is easier for Germany to follow his advice that for PIIGS to suffer. It is just impractical and will not happen. Knowing that we are in a depression, the Germans are not going to inflate just for political ease. There are other ways to stablize across the EZ. Some of them involve strong arming individuals and governments. Via the EU or bankers.
A review by Pat Donnelly aged over 21

That is all it is, a fairy story.Economic activity depends on people, not governments. If governments could do this then Japan would have done this.

I am grateful for this post because it exposes this fallacy. Mummy can wipe tears away and destroy an economy, as in the US, by dropping interest rates and inflating, but it cannot create one! The world has symmetries, but time flows only in one direction. Fool me once….

Inflation is beloved of lazy, stupid, larcenous “economists”. Real economists realize it will not reverse the deflation of the bubble ……. Except by declaring Jubilee! That form of inflation would succeed. Declare all debts halved…….! Half the moral danger or whatever. Expect many to hang back, expecting a further jubilee! Moral Hazard…..

There are no easy lazy solutions! The ignorant pseudoeconomists who propose this should work it out in their “models” first. Every time they propose something like this as with any government act, someone must pay a price and lose value.

Please read anything by Austrian school economists. It will help the reader to understand that the inflation machine and the fractional reserve banking machine are very powerful for a very long time. Then they are a busted flush, as is the economy wherein they fluorished.

If I were to form a conspiracy of people to obtain a banking licence now, with a view to copying what has gone on, it would take decades before I could do it. Ponzi schemes require idiocy and mania. Most have now got hangovers and will not become manic again in their lifetime. Kondratieff winter!

I am not convinced by the idea of price stickiness in general or nominal wage rigidities. However for a firm it can be optimal to reduce head count rather than hours, as head count reductions can increase productivity.

I accept there are menu costs and possibly costly wage bargaining. However, annual bonuses are very flexible, and workers on sales commission see their pay fluctuate each week, as do people on piece-rates or waitresses that make money on tips.

While I have read a lot of such rigidities, I have yet to see either a convincing theoretical foundation or convincing econometric studies of their existence.

Should Germany lower taxes? For me, living & working in Germany it does have its appeal. More money for me to spend, still I’m not so sure how much would come Greece’s way. Still cheaper in other countries
Should Germany’s employers be forced to increase wages? Not so sure that could be pushed through and even if it would be pushed through, the spending would somehow still need to find its way to Greece. Still cheaper in other countries
Should the government in Germany keep the taxes at current levels but spend it in Greece? Central planning has benefits but allocating capital efficiently isn’t one of them. Still, if the German government paid for flights to Greece and accomodation for holidays there I would go. Sign me up

There is an imbalance for a reason. Greece found it easier to borrow against future earnings for current consumption than to compete in producing, value for money, goods or services. The future is now & now the borrowing is to be paid back. The lunch wasn’t free.