Export surpluses: blessing or curse?

Export surpluses: blessing or curse?

by Prof Dr Eberhard Hamer

The German Federal Statistical Office has just announced a new monthly record concerning export. With 8.8% of GDP the German export surplus is nearly four times as high as China‘s. It is only thanks to the German export surpluses that for the member states in Southern Europe the deficits are acceptable for the euro.
Whereas the German export economy has been pretending for some years that it carries Germany‘s prosperity through its surplus, SME-research (Small and Medium-sized Enterprises) is disputing that because the German export surplus is foreign trade deficit of the partner countries who have to get into debt therefore. By that the debt spiral was born in Europe with high target account balances (clearing accounts) at ECB.
These liabilities of European member states toward Germany have grown so much now that they will never be able to be returned. So we have to estimate that they will be frozen or cancelled some day. That means nothing else than that our export industry is delivering to large extent to over-indebted member countries and that they will receive assets, but will never get any payment. We could as well give away our export goods to Greece, Italy, France or any else, which would make no difference. Permanent export surplus is a  transfer of fortune hidden by fake money on account (Scheinguthaben) and subventions given to the states in deficit at the expense of the surpluses.  
In 2015 Germany’s foreign trade with the US amounted 113.73 billion euros. US trade deficit with Germany was 53 billion dollars. Compared to the US deficit with China (350 billion dollars) this is still small. However, new President Trump attacked basically and with reason the foreign trade deficits of the USA. He wants to reduce the about 800 billion dollars of annual debt of the US – which is theoretically correct. Until now, there were attempts to compensate the deficit with Germany by means of costs for occupation, military purchases, the payment of fines by our corporations, and above all the sale of worthless bonds. So as it is in the case of the European debt states, in the case of the US we haven‘t got anything for our foreign trade surpluses, just hot air.
If the new President Trump now wants to reduce quickly the US trade deficit, China as the first foreign trade creditor of the USA will be prioritised. However, Germany might become a focus soon. This would mean a reduction or even a closure of the American market for all exports by means of tariffs, regulations, and as it is today, legal actions of the US (fines) against large German companies. In addition, six of the most important German export destinations are economically and politically unstable (Greece, Italy, France and others), which could also reduce our exports to these countries in the future.
Therefore, in the coming years the Mittelstandsinstitut (SME Institute Lower Saxony) doesn’t expect any significant German export surpluses, this means a decline of exports and a declining – or no – export surplus. This would have some consequences:

  1. The balance of foreign trade and of payments between the European countries would lead to a consolidation in the debt states and to a normalisation in the current surplus state.
  2. If, however, there are no more German export surpluses available for compensation in Europe, the indebtedness of the euro states will be more difficult, as so far it has been financed by this export surpluses. The euro states will either have to economize or the ECB will have to inflate the money supply more unrestrainedly.
  3. Decline in German exports also means decline in German economy, especially in big-sized economy, decline in growth, decrease in investments, in employment, in taxes and social contributions. The time of surplus could come to an end.

The past decades of one-sided foreign trade surpluses of Germany or China will no longer be permanent in the future. This situation will no longer be tolerated, and by the way, it is also inefficient (over-indebtedness). The principle of our Stability Law “balance of trade and payments” might be the normal and desirable situation in the future.    •
(Translation Current Concerns)

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