“The euro-zone more or less balance out trade-wise.”

Yep, this has been the situation up to now, but this balance out has hidden a multidue of sins – like the CA deficits in the South. This is all history now. The eurozone will need to run large surplus to get out of the hole. France is really the only zone economy with autonomous domestic demand left. Even Netherlands now seem to be crossing the bridge to becoming export dependent. As median ages rise there is no road back.

I don’t see how having unemployed resources helps you support a high currency value economy, you need young unemployed and qualified people to do the high value work, not over 50, low education people. This has been the clear evidence from Germany, where unemployment has been reduced dramatically for low value activity, but the export dependency (and hence the instability) has remained. It’s age structure that matters, not simply numbers.

The euro-zone more or less balance out trade-wise. Occam’s razor is on my side. Bretton Woods 2 is insane, agreed, and probably the real reason for the present crisis but this is something only the US (tariffs) and China (stop pegging then remnibi) can do something about. As I pointed out above, the demography argument is a non-issue precisely because there exists idle resources in the economy (aka unemployment). Again, I am going to worry about the demography when unemployment hits 2 % and inflation 7-10%. Not exactly in the cards right now. And, as I said above, the solution is obvious: immigration. Painless, no, but obvious.

Yes?

Cheers,

J. J.

“Shorter Edward Hugh: Export-dependent economies hit hard by contraction in international trade.”

Well, not quite, since I would say “global economy hit by major financial crisis due to demographically driven trade and asset price imbalances”.

Still, your version may be right. I would just like to see it argued for. Why, for example, is Finland export dependent (and Sweden, Japan, Italy, Germany, and now virtually the whole of Eastern Europe). Doesn’t this present any kind of problem for you.

Isn’t it a problem to have these very strong swings in GDP, and bank meltdowns etc etc.

I find your view rather complacent at the end of the day, and it seems to miss the central point which was, why, if Finland is so institutionally so sound is it evidently so economically so unstable, or do Finnish people simply prefer instability, and violent swings?

“As for the demography issue: yeah, maybe an aging population is bad for GDP growth. Who cares?”

Who cares? Try asking the people in Germany who may need to have their pensions trimmed after the most recent financial fiasco, or those who would like to have tax cuts, only to find their taxes are going to be incraesed. Or the young people who will both need to save for their own pensions, and fork out the taxes to help keep those who are already old. Or maybe this is all a non issue.

Frankly this complacency sounds to me just like the people who told me not to worry about Spain since house prices could simply keep on rising “forever”. It seems to me you are saying population ageing is no problem, since that pyramid can also keep inverting indefinitely.

One day we will all get tired of labeling every important problem a “non-issue” and begin to learn that serious questions are best handled by thinking what to do about them and then reacting.

As for the demography issue: yeah, maybe an aging population is bad for GDP growth. Who cares? What matters is GDP and GNI per capita. In fact, workers are going to benefit from demographic trends in Europe. This is not rocket science. More or the same amount of wealth + less people + less workers = workers benefit twice, from having less to share with and from having greater demand for their services. As for society, this is not a problem as long as there is unemployment, and when (if) Europe reach full employment, the debate on immigration will change course swiftly.

The GDP has been greatly influenced by the big industry Metal and Wood. In the latter they have taken the crisis as an opportunity for cutting cost in Finland and redeploying resources in emerging markets (Latin America and China).

The increase of wood tarifs from Russia has had an influence on the wood industry thereby the GDP.

As you highlighted on the biggest issue for Finland is the fact it belongs to the EMU hence its inability to devaluate the currency as it has always done in the past to gain back competitiveness…

Now, I’m not sure how much the government (backed by Bank of Finland) can keep on borrowing as the retirement wave will be stronger felt than in any European countries. Yet their baseline scenario is for a export led recovery hence I prefer not to imagine a scenario where this won’t happen its consequences (would they stop paying retirement benefits? would they increase tax to unsustainable level that will trigger political change?)

One interesting blog that relate some information with quite sarcastic views: http://housingfinland.blogspot.com/