Five G-20 Countries Placed on New America’s Current Account Surplus Watch

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China ,Germany, Japan, Saudi Arabia, and Russia have been placed on a new Watch List for countries that have excessively large current account surpluses and for not taking adequate corrective measures. Check out the full list.
Ahead of the G-20, President Obama rightly stated that all countries, surplus as well as deficit economies, have a responsibility to help rebalance the global economy. For too long, current account deficit economies have borne the major burden of adjustment to the detriment of world economic growth.
In recognition of the negative impact chronic surplus economies have on global demand, the Economic Growth Program at the New America Foundation has launched the Current Account Surplus Watch. The Surplus Watch is the first comprehensive measure of economies with large current account surpluses that also takes into account the policies economies take to stimulate demand or otherwise offset their surpluses.
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Unlike the simple numeric current account targets that U.S. Treasury Secretary Timothy Geithner has proposed, the Surplus Watch takes into consideration the policies countries pursue to increase domestic and international demand through fiscal expansion, exchange rate appreciation, and international development assistance. The Surplus Watch also divides surplus economies into two lists, Manufacturing Economies, which mainly export manufactured goods and Resource Economies, which mainly export energy commodities.
In many economies, surpluses remain elevated and are projected to rise more in the years ahead, threatening a sustainable world economic recovery. Leaders must pay attention to their rise and also the measures they can take to address these surpluses.

— Sam Sherraden

Comments

44 comments on “Five G-20 Countries Placed on New America’s Current Account Surplus Watch

  1. PissedOffAmerican says:

    Steve, heres the fuckin’ outfit that hosts the slimeball sites that keep spamming your blog….
    http://www.markosweb.com/contacts/
    If you look the page over, you will find a way to remove your blog from their spamming bot. Look on the left hand side of the page.

    Reply

  2. DakotabornKansan says:
  3. Carroll says:

    Posted by Dan Kervick, Nov 11 2010, 10:45PM – Link
    I am 51 Carroll.
    The aggregate benefits of trade for both the United States and every other country in have been enormous. The global trading system is a massive engine for allocation of capital to productive enterprises and for the creation of wealth. The problem, however, is that in the United States the permissive mechanisms for distributing the wealth created by trade allow for tremendous inequality, an inequality gap that has been growing and growing. Thus many workers have been individually damaged by trade, while others have barely kept pace and certainly have not seen their incomes rise at a rate commensurate with their increase in productivity. The answer is not less trade; the answer is to redesign the means by which the benefits of trade are distributed and the wealth created by trade is shared.
    We have also had a more recent problem in which a poorly regulated financial system has undermined the role of finance as the catalyst for the creation of new wealth and has allowed it to become clogged with a set of self-destructive speculative and ponzi schemes, designed by some very clever and exploitative people, for the mere making of money, and for the bleeding extraction of already existing wealth as it changes hands in the three card Monty run by the financial class.
    We can fix that problem too. But isolating our economy and seeking to protect it from the dynamism and creativity of our hard-working fellow human beings is the wrong path
    >>>>>>>>>>>>>>
    Not to pick on you Dan but globalization was created for the benefit of the largest corporations and multi nationals and multi naional wannbes. It was not created as a wealth enrichment for workers. I know this because I was there in 1966 when GATT initiated the aspects most detrimental to US industry.
    So, Number one it is highly unlikely that, and in fact, never has been tweaked to benefit US labor.
    But you haven’t been specific enough…who has collected the wealth from globalized free trade? Be specific, don’t give me the glossy advertisements for it like…”The global trading system is a massive engine for allocation of capital to productive enterprises and for the creation of wealth”.
    That’s a litle text book sound bit. Get to the nuts and bolts.
    Do you mean it has enriched third world workers? Stockholders? Who?
    Are 500 jobs in the US created by luring a foreign corp to Virginia with 20 year tax breaks and free installation of all their infrastructure courtesy of a US state’s taxpayer dollars a good trade for 80 million jobs off shored for less expensive labor?
    Let me ask again..exactly what do you do and do you base your theories and opinions on your own single business or work related situation or have you had a broad range of experience with various US businesses and industry that compete with the free trade system?
    Not that you are guilty this, but too often people with opinions get those opinions based on their own personal frame or work frame of reference not the bigger or more complicated picture produced by the results and facts outside their own experience.
    So ask yourself..first of all, what was globalization suppose to do?….not the reasons the advocates gave, but who it was actually suppose to benefit from the beginning.
    Then ask yourself why we have this huge sucking trade deficit.

    Reply

  4. sanitychecker says:

    DK: I do not condemn the soldiers. I feel deep empathy for them (in fact, personal kinship). I am not grateful for what they do but I respect them. More important, I hope none of them gets hurt.

    Reply

  5. DakotabornKansan says:

    Globalization, Asian Tigers, Celtic Tigers and U.S. Victims of Disaster Capitalism
    Quoting Dan Kervick,

    Reply

  6. Dan Kervick says:

    I am 51 Carroll.
    The aggregate benefits of trade for both the United States and every other country in have been enormous. The global trading system is a massive engine for allocation of capital to productive enterprises and for the creation of wealth. The problem, however, is that in the United States the permissive mechanisms for distributing the wealth created by trade allow for tremendous inequality, an inequality gap that has been growing and growing. Thus many workers have been individually damaged by trade, while others have barely kept pace and certainly have not seen their incomes rise at a rate commensurate with their increase in productivity. The answer is not less trade; the answer is to redesign the means by which the benefits of trade are distributed and the wealth created by trade is shared.
    We have also had a more recent problem in which a poorly regulated financial system has undermined the role of finance as the catalyst for the creation of new wealth and has allowed it to become clogged with a set of self-destructive speculative and ponzi schemes, designed by some very clever and exploitative people, for the mere making of money, and for the bleeding extraction of already existing wealth as it changes hands in the three card Monty run by the financial class.
    We can fix that problem too. But isolating our economy and seeking to protect it from the dynamism and creativity of our hard-working fellow human beings is the wrong path.

    Reply

  7. Don Bacon says:

    On this Veterans Day as we also consider world trade and US material consumption let’s also remember Rev. Martin Luther King, Jr., who spoke out against the Vietnam War on April 4, 1967.(excerpt)
    “I am convinced that if we are to get on the right side of the world revolution, we as a nation must undergo a radical revolution of values. We must rapidly begin the shift from a “thing-oriented” society to a “person-oriented” society. When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, materialism, and militarism are incapable of being conquered. . .
    “A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth. With righteous indignation, it will look across the seas and see individual capitalists of the West investing huge sums of money in Asia, Africa and South America, only to take the profits out with no concern for the social betterment of the countries, and say: “This is not just.” It will look at our alliance with the landed gentry of Latin America and say: “This is not just.”
    “The Western arrogance of feeling that it has everything to teach others and nothing to learn from them is not just. A true revolution of values will lay hands on the world order and say of war: “This way of settling differences is not just.”
    “This business of burning human beings with napalm, of filling our nation’s homes with orphans and widows, of injecting poisonous drugs of hate into veins of people normally humane, of sending men home from dark and bloody battlefields physically handicapped and psychologically deranged, cannot be reconciled with wisdom, justice and love.
    “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.”

    Reply

  8. Carroll says:

    Posted by Dan Kervick, Nov 11 2010, 12:59PM – Link
    “Isn’t the “Global Economy” wonderful? Wasn’t it a swell idea?”
    The global economy is an OUTSTANDING idea that has made billions of people richer than they would have been without a global economy
    >>>>>>>>>>>>>>>>>>>>
    I am curious …How old are you Dan, what do you do and how many businesses have you been involved or had experience with during your lifetime?
    The Global economy and Free trade HAS NOT made the American worker richer…or even kept them employed.
    So which billions of people getting richer are are you talking about?

    Reply

  9. DakotabornKansan says:
  10. sanitychecker says:

    To those men and women currently serving

    Reply

  11. DakotabornKansan says:

    Wishing all my fellow [I

    Reply

  12. DakotabornKansan says:

    More Folly

    Reply

  13. Don Bacon says:

    Obama: Free trade is a win-win proposition.
    The Seoul declaration is likely to fully endorse the joint statement agreed upon by finance ministers in Gyeongju last month, but a clear solution to thorny issues involving foreign exchange rates and trade balance is not expected due to wide differences between the U.S., Germany and China.
    In the communique released after the Gyeongju meeting, finance ministers agreed to move toward more market determined exchange rate systems and refrain from competitive devaluation of currencies.
    They also agreed to have the IMF set an

    Reply

  14. sanitychecker says:

    Where did our resources go?
    NYT Feb 2010: “The Taliban

    Reply

  15. Don Bacon says:

    in other news:
    SEOUL, South Korea — Aides to President Barack Obama and President Lee Myung-bak of South Korea were scrambling early today to reach agreement on a revised free-trade pact that they hoped would show their commitment to expand commerce ahead of the G-20 conference of leading nations.
    Ford and Chrysler are against it.
    Ford Motor Co. has told President Barack Obama

    Reply

  16. DakotabornKansan says:

    Realities Dickens could hardly have imagined

    Reply

  17. sanitychecker says:

    There’s no evidence that Obama has ever caved. When you see a contradiction between words and action, you can interpret in one of two ways: lying or caving. Obama is a BS artist whose policies are pretty much in line with his thinking.

    Reply

  18. sanitychecker says:

    QE2 is the surest way to create financial bubbles in emerging markets. So how’s that making the US a more responsible player than China or Germany? How come no one in the US media seems much concerned about it? The United States of Hypocrisy.

    Reply

  19. DakotabornKansan says:
  20. sanitychecker says:

    No one’s suggesting a military standoff, Dan. And, no, it’s not about business. It’s about hegemony. China signals the death knell of US hegemony. But since China is holding the US by the balls there’s not much we can do about it, except demonizing China in a well-orchestrated propaganda campaign. (That’s where the New America Foundation is expected to play its part.)
    You’re being naive about the effect of depegging the Renminbi on China purchasing power. The first major impact would be a hike in unemployment and a significant drop in growth in China — maybe down to 5%.
    Re. US exports, trouble is there’s not much we make the world wants.

    Reply

  21. Dan Kervick says:

    “Isn’t the “Global Economy” wonderful? Wasn’t it a swell idea?”
    The global economy is an OUTSTANDING idea that has made billions of people richer than they would have been without a global economy.

    Reply

  22. Dan Kervick says:

    China isn’t an enemy. We and the Chinese still have many shared interests – for example, interests in sustaining the global trade and security system without which neither country would be doing as well as we are. But US interests and Chinese interest don’t align perfectly, and it’s the job of the US government to promote US interests. That’s all. It’s not a military standoff. It’s just business.
    For all the complaints about the US shipping jobs overseas, you would think there would be more support when the government actually starts to do something to build US exports and create US jobs.

    Reply

  23. Don Bacon says:

    Of the top ten countries on the Watch List, seven are in Asia including the top five (with China #5). Like that’s news. India didn’t make the top ten because their education system isn’t so good (a legacy of colonialism) and there is no watch list for services.
    That’s one list that India would make because it is a major recipient of US service-job outsourcing. The includes technical support, accounting, even legal work, plus now Obama has agreed to give them high technology and nuclear support as well as political support.
    That really, really pisses off the US “partner” Pakistan, but that’s another story.
    The other three countries on the manufacturing Watch List top ten are Switzerland, Sweden and Germany. We need to watch them and encourage them to “address these surpluses.” They’re too successful — why can’t they be failures like the USA?
    I think Obama should get right on it, Switzerland first. Researchers at Switzerland

    Reply

  24. Carroll says:

    Isn’t the “Global Economy” wonderful? Wasn’t it a swell idea?
    It’s like trying to herd cats.

    Reply

  25. sanitychecker says:

    This is so reminiscent of the run-up to the Iraq war, when one by one all media outlets and think tanks, like sheep, lined up behind Bush to join his propaganda campaign.
    Today, China is the designated enemy: from the halls of Congress to Obama’s travel priorities to Krugman’s barking, we must all do our part and shout in unison: “China’s the villain!”
    Never mind that our deficit, employment, trade balance problems are mostly self-inflicted and we’re not willing to do anything about it. QE2 is just tit-for-tat. And we’re so serious about deficits we’ll further cut taxes for the super-rich…
    So the demonization of China has to begin in earnest, and what a surprise, therefore, that the New America Foundation should be there to help.
    Or perhaps I am mistaken and it’s a complete coincidence all these voices should start barking at China precisely at the same time and in the same key (the key of trade surpluses). As in a sort of spontaneous flash mob…

    Reply

  26. DakotabornKansan says:

    “Drive off that cliff, James, I want to commit suicide.

    Reply

  27. Don Bacon says:

    Computers and electronics
    What computers and electronics are manufactured in the USA? On a personal note, my son made a bundle several years ago writing software for integrated circuit (chip) fabrication machines in the USA. That’s ended. It’s all over. Chips are now fabricated elsewhere. He then moved into solar panels, and with China’s large investment in Green and solar that doesn’t look so hot either.
    cars and trucks
    I’ve seen all the Buicks in Shanghai (They have a different reputation there!). In pre-World War II China, one in five cars was a Buick. (wiki) Shanghai GM has 385 dealers around China including 17 in metropolitan Shanghai. In 2007, General Motors sold over 330,000 Buicks in China, more than twice what they sold in the United States. Buicks also sell in Taiwan. Buicks are produced and sold in China by Shanghai GM, and in Taiwan by Yulon. By the way, China also has a lot of German cars, VWs and BMWs, also produced in China.
    agricultural produce
    The largest US export to China is oil seeds and vegetable oil. Next is electrical and power generation machinery, both of which declined about fifteen percent 2008-2009.
    scrap
    Go for it. We have plenty of that.

    Reply

  28. Dan Kervick says:

    “Dan, the government is already paying people unemployment. While they are on unemployment, they have a chance to find a job or create a business, i.e. do something productive, which is more of a chance than they would have if they were on some government payroll.”
    Nadine, the unemployed do not have much of a chance to do something productive. There is limited capital available in this environment for starting a small business, and the vast majority of small businesses ventures fail anyway. Most of the people who are unemployed are not entrepreneurs, but are going to end up working for someone else. Only about 10% of Americans own and operate their own business.
    We don’t have to pay people to move rocks. We already know about all kinds of much more productive work people can do. The most productive thing many of them can now do is either teach the skills and competencies they already possess to other unemployed people, or acquire new skills and competencies themselves. That’s more productive than pounding the pavement, submitting resumes and waiting for the phone to ring. We can pay other people to do that for them, or even network them for partnerships in entrepreneurial activity and help them obtain the capital they need. Some of that goes on now, but it is much too crude and low-scale.
    From time to time the private economy fails on a large scale to produce enough jobs to employ all of our people who are capable and willing to work. Since we can always think of many useful things that can be done – even moving rocks if there are rocks that actually need moving – we should step in and put them to work, and also hire people to search for private industry work for them. We can set up incentive systems within the federal that make sure the government work is designed as temporary, that federal agencies are properly incentivized to prepare people for private industry work and transition them into it; and that the work-and-training program facilitates the growth of private endeavors rather than draws labor away from them. If the government hires an unemployed person and retrains him, then he can become a much more attractive applicant on the job market. In the meantime, they have the dignity of actually having a job and a reasonable amount of income.
    Our current system for handling unemployment is an antiquated, understaffed and low functioning system for warehousing the unemployed and giving them checks. It does little to make use of the productive work these people are already capable of doing, right now; and it does little to rectify the conditions that contribute to them being unemployed in the first place, or stimulate private sector hiring.
    As far as moving rocks, I hike fairly often on some local trails that were cleared and maintained by the Civilian Conservation Corps, and that contain well-built huts, pavilions and other facilities that the CCC erected. Don’t knock it.

    Reply

  29. nadine says:

    “Chinese consumers could then afford to purchase the many American-made goods that are already highly sought in China like: _____________ , _______________ & _____________.”
    like: Computers and electronics, cars and trucks, agricultural produce, and scrap. The Buick may be history in the US, but it is selling briskly in China.
    We exported about $70 billion dollars worth to China in 2009. It was just dwarfed by the almost $400 billion we imported.

    Reply

  30. nadine says:

    “We are also following an overly passive policy toward unemployment, standing around waiting for the private economy to generate jobs. We should create federal powers that allow our government to operate as the hirer of last resort. ” (Dan Kervick)
    Oy oy oy. Actually, the government hasn’t been just standing around. The government has been clubbing the private sector over the head with the promise of higher taxes, more regulation, higher energy costs, a debased dollar, and to top it off, Obamacare! whose costs nobody can even compute.
    Then Obama wonders, why won’t the private sector hire? they told me it would recover by now. Is it a conspiracy against me?
    Dan, the government is already paying people unemployment. While they are on unemployment, they have a chance to find a job or create a business, i.e. do something productive, which is more of a chance than they would have if they were on some government payroll.
    You are practically recommending that we pay a million people to move rocks from pile A to pile B, because that will “employ” them. Unfortunately for the economy, employment doesn’t count toward economic growth if all these people are not doing anything productive.
    Government programs are not productive because they are not created by businessmen interested in a return, but by politicians interested in the next election. Almost by definition, they don’t go where it would make sense for them to go, because if it made sense, the private sector would have done it already. Exceptions are rare.

    Reply

  31. Don Bacon says:

    Chinese consumers could then afford to purchase the many American-made goods that are already highly sought in China like: _____________ , _______________ & _____________.

    Reply

  32. David Billington says:

    “If I thought Obama intended the quantitative easing as a bargaining chip – a retaliatory
    devaluing of the US dollar to get China et. al. to stop holding their own currencies artificially low,
    then I might think there was sense in it. Unfortunately, I think Bernanke is just doing it because
    we’re running a $4 Trillion Fed budget on $2.5 Trillion of revenues, and he can’t sell enough
    Treasuries to finance the deficit.” (Nadine)
    I don’t think either of these could be the intended reasons. With the yuan and the price of oil
    pegged to the dollar, China would have no reason to accelerate conversion of its dollar reserves.
    If the monetary easing devalues the dollar in other currencies, it will raise the cost of borrowing.
    But I don’t really understand why the Fed made this decision.
    “Don Bacon, “adequate corrective measures mean “stop pegging your currency to the dollar at an
    artificially low level that helps your manufacturers and hurts US manufacturers.”” (Nadine)
    The problem is that US firms are the ones hiring Chinese fabrication facilities to produce goods
    for export back to the United States. If our firms didn’t make their products over there, the
    products would cost American consumers many times more over here. The loss of American jobs
    and the sweatshop conditions in some Chinese factories are the underside of the relationship but
    it exists because American consumers want these prices. China is gaming the exchange rate for
    its benefit but it does so in collusion with American industry and consumers.

    Reply

  33. David Billington says:

    “Multilateralism is a joke.” (Wigwag)
    There is an interesting article in the current Atlantic Monthly by James Fallows on the cooperation
    between China and America on new coal technologies. More lateralism of this kind would I think
    be in everyone’s interest.
    “Certainly many of those countries that are excluded from the G-20 seem to think the
    organization is more than a showpiece, since they worry publicly about the lack of global influence
    that comes from their exclusion.” (Dan Kervick)
    Thirty percent of the world’s people live in small countries not represented at these gatherings
    and that fact should be more of an issue than it is. Meetings where there is an extreme distance
    between large and small aren’t practical but the solution then should be for the smaller states to
    group together and be represented in groups.

    Reply

  34. David Billington says:

    Sam – Making a distinction between surpluses earned from manufacturing vs. resource exports is
    useful and I would keep it. However, from your post it is not clear that the current account watch in
    its present form takes into account the critical differences in political and labor conditions that
    separate countries like Sweden from China. I don’t think they really should be grouped together. I
    would also make sure you look at surplus countries to see whether they run surpluses with everyone
    or only with certain trading partners.

    Reply

  35. Dan Kervick says:

    “Now how is not pegging renminbis to the dollar going to cause those devices (or Dell computers, etc.) to be suddenly manufactured in the USA instead of China?”
    It’s not. But it will raise the purchasing power of Chinese consumers so that more of them can afford to purchase the many American goods that are already highly sought in China but that relatively few Chinese can afford to buy.

    Reply

  36. Don Bacon says:

    I just returned from a pot luck dinner, and when it was over one of the guys at the table showed me a flashlight that he was going to use to get home (we’re out in the country). It had three different lenses, plus a bottle opener and he said that he bought it for less than a buck! It was (of course) made in China.
    Now how is not pegging renminbis to the dollar going to cause those devices (or Dell computers, etc.) to be suddenly manufactured in the USA instead of China?
    Or is the objective only to reduce profit for China? But that is an impossible goal because my friend would be more than willing to pay a buck and a quarter instead of a dollar for that flashlight.
    And if the solution is to “stop pegging your currency to the dollar” then why doesn’t the above diary say that, instead of “Leaders must pay attention to their rise and also the measures they can take to address these surpluses” which is mostly meaningless? How does one address a surplus? “Hello, surplus . . .”

    Reply

  37. Dan Kervick says:

    If the people of a given country are simply more abstemious and thrifty than those of another, and prefer to save a higher percentage of what their productive work earns for them, then they really can

    Reply

  38. sanitychecker says:

    >> US manufacturers
    What’s that?

    Reply

  39. nadine says:

    Don Bacon, “adequate corrective measures mean “stop pegging your currency to the dollar at an artificially low level that helps your manufacturers and hurts US manufacturers.”

    Reply

  40. sanitychecker says:

    How about a watchlist of countries that have to import everything because all they produce is pizza and lawyers?

    Reply

  41. Don Bacon says:

    How should these countries take “adequate corrective measures” — by refusing to sell goods and petroleum to the over-consuming USA?
    How does one punish a country for making too much money?
    Can someone please translate this economist gibberish into plain English?
    Is it only losers who expect winners to “address these surpluses?”

    Reply

  42. nadine says:

    If I thought Obama intended the qualitative easing as a bargaining chip – a retaliatory devaluing of the US dollar to get China et. al. to stop holding their own currencies artificially low, then I might think there was sense in it. Unfortunately, I think Bernanke is just doing it because we’re running a $4 Trillion Fed budget on $2.5 Trillion of revenues, and he can’t sell enough Treasuries to finance the deficit.

    Reply

  43. Dan Kervick says:

    We really don’t know what the G-20 may or may not have accomplished, since their major meetings are closed-door meetings. But it stands to reason that the heads of state and their finance ministers are reaching agreements on coordinated macroeconomic policies. Certainly many of those countries that are excluded from the G-20 seem to think the organization is more than a showpiece, since they worry publicly about the lack of global influence that comes from their exclusion.

    Reply

  44. WigWag says:

    The G-20; just another in a long line of multilateral institutions that accomplishes absolutely nothing. I defy anyone to come up with even one substantive achievement instituted by the G-20 which helps make the world a better place.
    The G-20 is little more than a fraud perpetrated on the public by politicians looking to posture for their citizens and a credulous press.
    Like the Copenhagen Summit on climate change and the various constitutent parts of the United Nations, anyone who places any hope in these organizations is deliberately fooling themselves.
    Multilateralism is a joke.

    Reply

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