I remember from before and after the fall of the Berlin Wall: Before the fall, West Germany ran a current account surplus. This was derided as an imbalance, and West Germany was urged to consume more. I suppose that meant that the deficit countries could have appreciated. To what real benefit of the current account deficit countries I do not know. After the fall, Germany borrowed heavily to finance reconstruction in, and transfers to, the East. The current account surplus disappeared, and briefly went into deficit. Because repayment was credible, there was upward pressure on the Deutsche Mark. This was derided as an imbalance, too.
Fixed rates, flex rates, single currency, the underlying real phenomena are the same.
I now know the solution: Prohibit international capital flows!
Another factor that I think should not be underestimated is the intended audience, whose comprehension of basic economics is quite likely close to zero.
In my experience, when it comes to "professional" discussion and commentary on economics, >95% percent is meaningless drivel. People talk a lot, yet say very little. Everyone thinks they and everyone else sounds smart, but no one really has a clue. It is basically a rather bizarre performative ritual.
Excellent scholarly and intuitive points. Two comments. First, the report gives another endorsement of the Draghi Report, published only 21 months ago — a reminder that Europe’s time-to-build is long. Second, it is perhaps interesting that the very “imbalances” the authors worry about at the global level become ordinary intertemporal allocation choices once one moves to a single-economy setup.
They lost me at "Trade is 'reciprocal' when it is mutually beneficial for countries." We know trade us mutually beneficial because otherwise the parties would't do the trade! (Presumably by referring countries instead of individuals (and thereby making in a category error) they mean to refer to trade that makes some third parties within a country worse off. But it would be silly to say that, so they don't.)
The mind boggles to think the G7 European authors actually passed Econ 101. Sadly, too many in the US seem to want to emulate the European econ illiterates on this. I am afraid that we US and European residents will get the toxic prescriptions the G7 economic alchemists are shilling to and for politicians -- and get it good and hard.
Welcome back the potential for the Depressions of 1929, 1932 and 1937 when good people thought they were making things better but made them worse. Far worse. As Barton Swain notes in todays (6.18.2026) WSJ, often for government the best thing it can do in managing economics is nothing at all.
Europe’s growth is low by historical and comparative standards, but the continent is running a sizeable current account surplus. This suggests that Europeans are not ‘overconsuming’ as the piece asserts.
Enlightening, as always; yet, I doubt a sensible subset of economists would agree with you. Tell them about supply side economics and they get a mental paralysis - maybe they are in induced coma?
The G7 opinionated piece is déja vu all over again. I first heard such garbage in the 1980's. What do we have an international monetary system for?
I feel like I'm reliving my youth. Thank you, G7.
I remember from before and after the fall of the Berlin Wall: Before the fall, West Germany ran a current account surplus. This was derided as an imbalance, and West Germany was urged to consume more. I suppose that meant that the deficit countries could have appreciated. To what real benefit of the current account deficit countries I do not know. After the fall, Germany borrowed heavily to finance reconstruction in, and transfers to, the East. The current account surplus disappeared, and briefly went into deficit. Because repayment was credible, there was upward pressure on the Deutsche Mark. This was derided as an imbalance, too.
Fixed rates, flex rates, single currency, the underlying real phenomena are the same.
I now know the solution: Prohibit international capital flows!
Another factor that I think should not be underestimated is the intended audience, whose comprehension of basic economics is quite likely close to zero.
In my experience, when it comes to "professional" discussion and commentary on economics, >95% percent is meaningless drivel. People talk a lot, yet say very little. Everyone thinks they and everyone else sounds smart, but no one really has a clue. It is basically a rather bizarre performative ritual.
Excellent scholarly and intuitive points. Two comments. First, the report gives another endorsement of the Draghi Report, published only 21 months ago — a reminder that Europe’s time-to-build is long. Second, it is perhaps interesting that the very “imbalances” the authors worry about at the global level become ordinary intertemporal allocation choices once one moves to a single-economy setup.
They lost me at "Trade is 'reciprocal' when it is mutually beneficial for countries." We know trade us mutually beneficial because otherwise the parties would't do the trade! (Presumably by referring countries instead of individuals (and thereby making in a category error) they mean to refer to trade that makes some third parties within a country worse off. But it would be silly to say that, so they don't.)
I wish we could grow up and leave emotional language, imbalance, and return to mutual trade and create a dynamic market.
The USA MUST reduce its domestic expenditures and regulatory burden. At the same time we must increase our defense posture and expenditures.
Great post, except for one part
> They say the problem with France’s economy is that the French language has no word for entrepreneur
Entrepreneur is a loanword from French!
Do I really have to explain that's a joke?
I’m shocked! Economists lobbing veiled warnings and threats on behalf of their respective governments.
The mind boggles to think the G7 European authors actually passed Econ 101. Sadly, too many in the US seem to want to emulate the European econ illiterates on this. I am afraid that we US and European residents will get the toxic prescriptions the G7 economic alchemists are shilling to and for politicians -- and get it good and hard.
Welcome back the potential for the Depressions of 1929, 1932 and 1937 when good people thought they were making things better but made them worse. Far worse. As Barton Swain notes in todays (6.18.2026) WSJ, often for government the best thing it can do in managing economics is nothing at all.
Europe’s growth is low by historical and comparative standards, but the continent is running a sizeable current account surplus. This suggests that Europeans are not ‘overconsuming’ as the piece asserts.
Enlightening, as always; yet, I doubt a sensible subset of economists would agree with you. Tell them about supply side economics and they get a mental paralysis - maybe they are in induced coma?