The ‘Exorbitant Privilege’ of Donald Trump and Angela Merkel
The U.S. and Germany get huge benefits from their currencies. They should remember that when complaining about trade or defending surpluses.
Germany and America want to have their cake and eat it too.
Photographer: Handout/Getty Images South AmericaIn economic terms, the United States and Germany are two of the luckiest nations on earth. Like two spoiled children, their refusal to appreciate that privilege lies at the root of their trade dispute.
I’m talking here about currencies. As the issuer of the world’s main reserve currency, the U.S. has for years enjoyed the luxury of living beyond its means. If they were happening anywhere else, the U.S. current account deficits (which reflect an excess of consumption over saving) would have triggered a painful foreign exchange adjustment long ago.