Nov. 30, 2019 — The “bicycle theory” used to be a metaphor for international trade policy. Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests. I don’t know if the theory was ever right. (And, to be honest, I don’t entirely understand why forward movement keeps a bicycle from falling over.) But if we had stood still on trade policy over the last three years we would be a lot better off than where we are now.
October 26, 2019 — This is a good time to gauge the rankings of the dollar and its rivals as major international currencies. The Bank for International Settlements came out in September with its triennial survey of turnover in the world’s foreign exchange markets. The IMF’s statistics on central bank holdings of foreign exchange reserves have gotten much more reliable lately, because China has joined in on reporting its holdings to the IMF (as Eswar Prasad explains). And SWIFT offers every month its numbers on use of major currencies in international payments.
September 30, 2019 — As long as the German economy was doing well, as it was during the recovery from the 2008 global financial crisis, there existed a coherent rationale for German fiscal austerity. The national commitment to budget discipline was enshrined in the 2009 “debt brake,” which limits the federal structural deficit to 0.35% of GDP, and by the 2011 “schwarze Null” (that is, “black zero”) policy of fully balancing the budget. Indeed Angela Merkel’s government proudly achieved a balanced budget in 2012 and surpluses in 2014-18.