But some excessive virtues might not be a too bad vice for the world economy.

Sir yes, yes and yes I would absolutely agree with Martin Wolf that Germany must increase its demand, if only he could be able to hint at exactly what the Germans could be demanding more of in order to achieve a sustainable growth, “Excessive virtue can be a vice for the world economy”.

Perhaps, taking advantage of their currently quite green mindset, we could convince them to make a helicopter drop of resources on some green projects… that virtue, even though sounding a bit excessive, would perhaps not be a vice for the world economy.

Obama has more than enough on his own plate

Sir Martin Wolf is right blaming an absolutely excessive consumption gap between deficit countries led by the US and surplus countries led by China for the ongoing implosion, now when the music stopped, and that therefore it is not only the US’s responsibility to provide the fixes, “Why President Obama must mend a sick world economy”, January 21.

I would go even one step further. When Wolf mentions that “much of the expansion is expected to come from the US Federal Budget” we should not, even for a second, “leave aside the question of whether this will work”, knowing, as Wolf says, that the “US cannot run fiscal deficits of 10 per cent of GDP indefinitely.” In this sick world economy, one of the few healthy spots that remains is the dollar, curiously the representative of the leading deficit country, and to keep the dollar healthy should be one of Obama’s prime responsibilities.

Anyhow anyone that stops looking at yesterdays statistics and walks the main streets, in real time, will soon come to the conclusion that whatever “good” the fiscal expansion might bring to the USA, pardoning financial losses, reducing excess inventories, financing private savings, making the local adjustments easier, a sustainable USA expansion does not carry sufficient punch to assist in keeping up any significant consumption disequilibrium, and so the adjustments now going on in the surplus countries must, unfortunately, be absolutely brutal. That though cannot be Obama’s prime concern; he has enough on his own plate. In other words, the world cannot afford the US drowning while trying uselessly to save it. “Healer heal thyself”, comes more readily to my mind.

Finally, Wolf rightly mentions that “more of the world’s surplus capital needs to flow into investments in emerging countries” but for that to happen the financial system requires two reforms that have to take place in Basel. First to take away the power of agencies to set up AAA directions signs and that will by sheer inertia always tend to guide capital to status quo economies; and second to eliminate the current formula of minimum capital requirements for banks based on risks and that places an additional tax burden on those risks that are more prevalent in emerging markets. Those two reforms are in my mind more important and urgent than the also much needed IMF governance reforms that Wolf focuses his attention on.

Send China’s surplus to Africa!

Sir, somehow I felt that a question mark was missing in the title of Martin Wolf’s “The Right way to respond to China’s exploding surpluses” May 30, since after reading it I must confess I did not feel much wiser. Yes, agreed, China is accumulating much capital now, but that perhaps this is only so because we are using very short yardsticks to measure, like years instead of decades or even centuries. Yes, it seems that China should be able to spend more on such praiseworthy items as health and education, but we also know that it is not possible to spend in a contained way without having it slip over into other demands, like for instance more cars for teachers and doctors which then will require more oil. The real answer to China’s surpluses must be helping them to come up with a long term investment plan that makes sense. For instance, in a world where the energy/carbon-emission factor is clearly going to impose constraints on growth, there might be many preparatory investments that China could do. But if we start looking at it from that angle let us not forget that the US could also be better of doing some of these investments instead of using Chinas savings in dollars for consumption, or for postponing fundamental health and education reforms.

In a global world there will come a moment when we need to start analyzing the global marginal return of projects (GMR), and, from this perspective, perhaps Glenn Denning and Jeffrey Sachs’ article “How the rich world can help Africa help itself” and that coincidentally appears next to Wolf’s might be faulty titled too and should read “How China should reallocate their savings and help Africa help itself.”