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Tag Archives: international investment position

On The Fall Of The Liberal International Economic Order, Part II

In the last post, I linked to John J. Mearsheimer’s paper Bound To Fail: The Rise And Fall Of The Liberal International Order. The paper was more from a political perspective than from a perspective of political economy, although it did go into the economics of it.There’s a Post-Keynesian paper by Thomas Palley published last year, I thought I should recommend reading, since it goes into the political economy aspect of it. Also it is rooted more in the heterodox Keynesian perspective, unlike...

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My Favourite Chart, Updated: Euro Area Imbalances

With crisis in Italy, the Euro Area is back in news! But it is not just Italy, the crisis is far from over, as this chart from Eurostat—my favourite—illustrates:EA19, Net International Investment PositionThe Euro Area doesn’t have a central government with large fiscal powers and hence there is nothing to keep imbalances in check. So some countries—with no fault of theirs—accumulated large debts. The net international investment position captures the financial position of a country. If it is...

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Euro Area Balance Of Payments, Again!

… But more disturbing still is the notion that with a common currency the ‘balance or payments problem’ is eliminated and therefore that individual countries are relieved of the need to pay for their imports with exports.Quite the reverse: the existence or a common currency makes a country more directly dependent on its ability to sell exports and import substitutes than it was before, particularly as it will then possess no means whereby it can (in the broadest sense) protect itself against...

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How The Economist‘s Cover Story Is Causing Discomfort

The recent cover story of The Economist on Germany’s trade surpluses—titled The German Problem: Why Germany’s Current-Account Surplus Is Bad For The World Economy— is the biggest concession the magazine has made to Keynesianism. Of course, it’s not as if the publication is now a full Keynesian but still, it’s a large admission.I have two previous posts on this:The Economist On Germany’s Balance Of PaymentsJohn Maynard Keynes On Surplus Nations’ ObligationsSo it was expected that The...

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Public Debt And Current Account Deficits, Part 2

This is a continuation of a recent post at this blog, Public Debt And Current Account Deficits, in which I argued that the current account balance of payments affects the public debt.A usual objection to the connection is that the two deficits—current account deficit and the budget deficit—although connected by an identity, don’t move together and in fact move in the opposite direction frequently. This point was raised by the blog Econbrower, yesterday.The identity in question...

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Do US Trade Deficits Result In “Net Profits” For The US?

It’s frequently claimed that the US ?? has trade deficits but since the US dollar has not collapsed, the ones saying that the US does not have a balance of payments constraint are all wrong.Now there are several errors in this line of reasoning but going straight to the point: the balance-of-payments constraint is first a constraint on output. There’s a deflationary bias in the US output because of the imbalance in trade.This article is written in response to a blog post Cumulative U.S. Trade...

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The UK’s International Investment Position

There’s one thing that slipped out of my mind in my recent post Sterling Flash Crash And The UK’s Balance Of Payments, i.e., the UK’s international investment position.The Bank of England’s financial stability report from July has an interesting discussion on this with this chart.UK’s net international position. Source: BOE.with the comment:The currency composition of the United Kingdom’s external balance sheet does not amplify risks associated with a sterling depreciation.Currency mismatches...

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Abraham Ptachya Lerner, An Inconsistent Fellow

This quote of Abba Lerner from his article “The Burden of the National Debt,” in Lloyd A. Metzler et al.,Income, Employment and Public Policy (New York, 1948), p. 256 is frequently quoted in the Post-Keynesian blogosphere:One of the most effective ways of clearing up this most serious of all semantic confusions is to point out that private debt differs from national debt in being external. It is owed by one person to others. That is what makes it burdensome. Because it is interpersonal the...

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