Germany should follow in the footsteps of China

This guest post is by Arvind Subramanian, senior fellow at the Peterson Institute for International Economics.  Yesterday’s announcement by China to introduce greater exchange rate flexibility is unambiguously good news. Greater currency flexibility will help China with its domestic overheating problem.  But China deserves a lot of credit for its act of responsible international citizenship, for making its contribution to global re-balancing. Two implications follow.

For the first time, China has become the world’s fifth biggest arms exporter – its highest ranking since the cold war – pushing the United Kingdom from the top five exporters list, a Sweden-based research institute said Monday.

China’s oil demand will rise at a faster pace this year than previously forecast amid an economic recovery, according to Deutsche Bank AG. Consumption by the world’s second-largest crude user will increase by 4.9 percent, or 468,000 barrels a day, Soozhana Choi, Deutsche Bank’s chief oil strategist in Singapore, said in a report e-mailed today. The bank predicted in December that growth would be 3.4 percent this year.

China’s recovery is in quite good shape China’s economic growth accelerated for the first time in two years as government efforts to revive demand drove a rebound in industrial output, retail sales and the housing market.

Revised estimates of Japan's growth have been cut in half, from 1.4% to .7%. More importantly, Japan has a small but shrinking current account surplus (in spite of running a trade deficit for some time). Once the current account surplus vanishes, and I believe it will, Japan will become somewhat dependent on foreigners to handle its budget deficit. Good luck with that at 0% interest rates.

Submitted by Daniel Cloud Boldly They Rode And Well I believe that Shinzo Abe has made a very serious strategic miscalculation. I used to be confused in much the same way he now seems to be, but I was cured of my confusion by thinking about Chinese inflation.

Every country in the world understands the need for global trade rebalancing. Yet, politicians have done nothing but take stances that mathematically cannot work. Mathematical Impossibilities