Saturday, April 4, 2015

How Germany Can Help The Global Economy

Ben Bernanke is concerned about the global imbalance between investment and savings.  When savings exceed the level of investment a shortfall in aggregate demand is the outcome.  His first effort to describe this problem focused on the global imbalance.  In this post he focuses on the Eurozone.  The EZ has a trade imbalance with the rest of the world which is primarily the result of Germany's trade surplus.  As the euro declines in value relative to the rest of the world Germany's trade surplus will increase.  Bernanke argues that Germany could take steps the improve the imbalance within the EZ, and with the rest of the world.  He believes that Germany would benefit along with the global economy if it invested more of its surplus savings in infrastructure and if it stimulated business investment and encouraged growth in wages.

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