Those trade flows - both the inflows and the outflows - are absolutely critical to Singapore’s continued prosperity… Its total trade flows (~$493B USD) dwarf its actual domestic productivity (~$324B USD), so Singapore is the highest nation on my Y-axis here. Take a country in the top-left - Singapore: Singapore is a tiny trading outpost nation that serves as a primary gateway between East & West. Putting them together helps understand a nation better than either data point in isolation: The X-axis exists to show the profitability of that Trade. The Y-axis exists to show how much Trade a nation engages in. I define this axis as “ importance”, but you can substitute “ magnitude” for much of the same meaning. Not every nation actually profits directly from Trade, but that doesn’t make the imports less important to understanding what’s going on in each country. The point of the Y-axis is to show the size of Trade flows in and out of a nation relative to its GDP. The Y-axis here is the “ Importance of International Trade ”, reflected as the / GDP. The X-axis therefore shows how profitable International Trade is to a country. Countries to the left spend more money buying foreign products (imports > exports), and countries to the right make more money selling to foreign nations (exports > imports). The X-axis here represents “ money a country makes by Trading with other countries ”. Viii) The Euro & the Single Market make it possible for Germany to pursue a strategy of Export-driven Wealth-creation that would be considered impossible in any other Western, high-GDP, high-population, high-wage-paying nationĮuropean nations that have found a way to support the German Productivity Engine have built a symbiotic relationship that strengthens their union This means German goods look cheaper than they otherwise would to non-EU markets Vii) The German Euro - the currency - then has its value suppressed via contamination with all the other (poorer-performing, non-Exporting) European nations Vi) The European Single Market functions to make German goods maximally attractive to trading partners within the EU by raising the effective-cost of imported goods This spells doom for Germany because of how dependant they are on selling to other countries …their currencies then become highly sought-after “Reserve Currencies” - making their products expensive and undermining the export-driven success that made their economies so great in the first place V) The price of industrial success is eventual failure: Industrial Exporter nations tend to become stable, regionally dominant economies… The more successful your nation is, the more expensive it becomes for you to fight the free market and maintain the fiction of a cheap - undesirable - currencyĬhina deals with this via intense autocratic market interventions that are unthinkable in the West or - when tried in our free markets - lead immediately to failure Iv) The price of your currency is a reflection of how desirable your whole nation’s economy is When China undervalues its currency, Chinese goods start looking real cheapįoreigners then buy way more Chinese goods than they otherwise would have Iii) Exchange rates are a Cheat Code for selling stuff - you might not be willing to cheat, but China is When the primary economic engine leaves a community, all the supporting economic activity leaves too, from barbershops to component suppliers Ii) Manufacturing Network Effects: 3 - 1 = 0 International competition can reduce employment in one geographic region without producing an offsetting increase in employment in that same region I) It is possible for a region to straight up lose at trade No other nation has a customer base anywhere near as diversified as Germany Only China runs a larger Surplus from Trade International trade is a primary source of German economic prosperity Germany is a major outlier among high-GDP developed nations and nobody talks about it Two questions sparked this: 1) why did Europe only adopt the Euro & the Single Market after its Cold War-era existential challenge was over, and 2) how has Germany maintained an export-oriented Industrial Manufacturing Powerhouse while every other developed nation is going post-Industrial? “The Germany Shock” - a summary: “ The Germany Shock” describes European growth & the efficiency-maximizing centralization of European manufacturing activity after the launch of the Single Market and the Euro. How Germany Is Able To Run The World’s Second Largest Export Economy In The Post-Industrial Era
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