Thanks for the link. It is of course always interesting to look at both sides of the coin when it comes to trade balance - capital "balance". As with all macro and economy things are relatively easy when look upon in isolation, but become much more difficult and controversive when combined.Originally Posted by Fuchs
One could argue that the UK or the US are in comparison in an overall better situation then Germany because the world is willing to invest into them, but that would be as narrow minded as to state that Germany is in a better shape because it is so much more competitive.
As you have written demographics play a central role in the net capital investments, however one should not lessen the influence of culture and politics and the often irrational aspects of markets. For example while the increasing population of the US was key for the heavy investement in the durable consumer good housing the cultural norms (want own suburb home) and politics (Fannie and Freddie) were also important. But the bubble was only possible due to the common illusion based on experience that housing prices "always" went up and that boundless greed was fueled by extremely easy credit in a time of very low interest rates. Massive investement/spending in construction drove many other sectors of the economy be in the US or in Spain.
In Germany and in Italy the government did not support private investment into the private building sector as heavily and combined with a different consumer climate/confidence and tighter credit and the aging population an important driving force for the economy was missed in the last ten years. Increased public and private investment might have helped the overall economy, but the current crisis has shown the danger of an excessive spending fuel by too loose credit outstripping demand by a great margin especially if followed up by crippling austerity.
Overall I have to confess that such discussion are very hard to do in such a from.
@Suferbeetle, I will also try to respond to your post, it might take a bit. Still I agree when you say:
Hayek and Keynes did invest a lot of their work and theory driven by experiences outside the realm of the "normal" economic environment. A cynic might say that a good deal of the economic research based upon a close look at recent stable times has hobbled the ability to tackle a big crisis. Most European and even more the dominant US-American economists suffered in short from a very focus on a restricted geographical area and a restricted timeframe.Maybe I am cheating, but, I wonder if both Keynes and Hayek have something to say…
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