Sense

Roger Bootle of Capital Economics is making sense.

There are umpteen countries which are running huge current account surpluses: last year, China’s surplus was 6pc of GDP, Taiwan’s 11pc, Malaysia’s 17pc and Singapore’s 19pc. The oil producers also ran huge surpluses – 5pc in Saudi Arabia (down from a massive 28pc the year before), 16pc in Libya and Qatar, and 26pc in Kuwait. Within Europe our two big oil producers, Russia and Norway, ran surpluses of 4pc and 14pc respectively.

Among non-oil producers in Europe, Germany and Holland ran surpluses of 5pc, and Switzerland 9pc. Moreover, these countries are in general sitting on huge international reserves. This is where the money is and it is where demand should expand.

China remains the key to Asia. The Chinese government cleverly changed the exchange rate regime governing the renminbi just before the G20 summit. However, this was nothing more than a cosmetic move designed to head off criticism. The consequent rise of the currency will be minimal.

Anyway, the more important issue is the willingness of the Chinese to rebalance the economy towards consumers and away from reliance on exports…

5 thoughts on “Sense

  1. I am afraid that my country has not ran a surplus of 5 pc last year, but a deficit of 5.3 pc instead. http://www.trouw.nl/nieuws/nederland/article2995702.ece/Begrotingstekort_2009_valt_hoger_uit.html
    (in Dutch)
    It’s not that everyone in the governments are convinced that it a good idea to make these often astronomical debs, to fight the current economic crises. It is more one of the disadvantages of our democratic political system, that country’s are forced to rise their debts in economic bad weather conditions, instead of lowering the standard of living a little. The government who refuse to make these huge debts, simply wont survive the next elections …
    Ron.

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  3. How would one shrink a current account deficit without a possibility to change exchange rates?

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