Down and Out for the Long Term: This Time it Really is Different

FN: An excellent article by Wolfgang Manchu explains why there can't possibly be a quick recovery from this mess and why the world won't go back to business as usual.

Down and out for the long term in Germany: "Global current account surpluses and deficits add up to zero. So if everybody is saving more, who will be dissaving? It will have to be the corporate sector in the countries with large net exports. So if the US, the UK and Spain are heading for a more balanced current account in the future, so will the surplus countries.

The current account balance can also be expressed as the sum of the trade balance, net earnings on foreign assets, and unilateral financial transfers. In several countries, including the US and Germany, the gap between exports and imports serves as a good proxy for the current account. A fall in the trade deficit in the US, UK and Spain implies a fall in the combined trade surplus elsewhere. And as some of the shifts in the US and the UK are likely to be structural, this will have long-term effects on others. In particular, it means the export model on which Germany, China and Japan rely, could suffer a cardiac arrest."

FN: For a more graphical view of the carnage New N Economics has an excellent post: World Economic Reports. The graphs for Japan, South Korea, Malaysia, India, Indonesia and Thailand are pretty freaky. The export driven economic model is being torn apart.