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Look to Germany and China for a model economic solution - By Bill Bonner

Neither the Germans nor the Chinese prospered by being grasshoppers. They got rich by being ants. And they’re still at it. China is still exporting…and making a $291 billion current account surplus this year. Germany will clear $187 billion. And now everyone is on their backs. La Tribune, in Paris, even dusts off a prophecy from a defunct 19th century critic, Friedrich Engels: “They will ruin not only other nations’ industries but those of their own country too.”

To bring us all up-to-date, the world appeared to prosper in the boom years ’97 to ’07 years (the micro-recession of ’01 excepted). The big exporters – China and Germany, who Martin Wolf calls “Chermany” – ran big trade surpluses. The big spenders – notably Greece and the US, who we will call Gremerica – ran large trade deficits. From these facts, Mr. Wolf infers that if the Cherman ants prosper by making, someone must impoverish himself by taking. In this case, the Gremericans…along with other grasshopper nations such a Great Britain.

The gist of the Krugman, Wolf, and Lagarde et al position is that in the world economy is ruled neither by good nor by evil, but by mathematics. An exporter, such as China or Germany, can only run a trade surplus equal and opposite to the deficits of other nations. What’s more, a grasshopper nation – such as the US – can only run a deficit insofar as the ants are willing to finance it. A deficit is no sin. Nor is hard work and savings anything to be proud of.

For more: Look to Germany and China for a model economic solution / The Christian Science Monitor -

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