I am not sure what, but, to hold the Eurozone together, requires something politically very difficult to be done.

Sir, you write: “IMF…economists reckon the real exchange rate was between 10 and 20 per cent weaker than appropriate in Germany, which continues to run huge trade surpluses, but overvalued by between 3 and 10 per cent for Spain. This is not a problem that a central bank can fix” “Central bankers and currency conflicts” July 28.

That is a central problem with the Euro, from day one, from when the bridges were burnt, and way too little has been done to solve it, in fact most efforts seem to have been to ignore it. 

And Sir, don’t tell us that central bankers have the right to be so unaware of this problem, so as for instance having assigned Greece a 0% risk weight, which caused Greece run even larger deficits, and Germany even larger surpluses, all mostly financed by German and French banks.

And, truthfully, have central bankers, with their hubris filled “whatever it takes” messaging communicated sufficiently their limitations to the politicians? I don’t think so.

What can be done to solve it? I have no firm idea but, what about a Euro effect compensation tax, by which surplus countries would be charging higher sales taxes than deficit countries, and all those revenues were shared out to all European equally by means of a Universal Basic Income? Would that be politically impossible? Perhaps, but if not something politically very difficult is done about this problem, it will become politically impossible to hold the Euro are together. 

The governments, the European Parliament, the Council of the European Union and the European Commission, cannot persist counting on European central bankers, like a Mario Draghi, to solve it. 

@PerKurowski

If the renminbi is as shaky and dangerous as Martin Wolf argues, why was it made part of IMF’s SDRs in October 2016?

Sir, Martin Wolf writes: “US policymakers should worry about China’s capital account, not its current account. That is where danger now lies… Given its macroeconomic imbalances, China could unleash considerable global mayhem… Capital would pour out, the renminbi would tumble and, in time, a globally unmanageable current account surplus would emerge…Today’s credit growth and consequent financial fragility are a direct consequence of the desire to prevent this from happening” “Chinese finance is storing up trouble” April 6.

Aha! And so what do we do? And so what does Martin Wolf suggest President Trump does when meeting his Chinese counterpart Xi Jinping in Florida this week?

Is all this just another excuse to lash out at Trump, in this case Trump’s concerns with the deficits in the trade account, those deficits that Wolf strangely seems to argue are totally disconnected to the capital accounts. In truth all this about “the macroeconomic imbalance” reads just like pure vintage Wolf. 

He for instance insists with a “China’s external accounts already played a significant role in the run-up to the financial crisis of 2007-08.” Significant perhaps but still much smaller than the role the distortions produced by Basel’s risk weighted capital requirements for banks played… like for AAA rated securities and Greece

But Sir, we should ask, where was Martin Wolf when, on October 1, 2016, the IMF made the renminbi part of its Special Drawing Rights… and thereby de facto awarding it a reserve currency status? Was that not a much more important moment for Wolf to step forward and opine, than a meeting at a Mar-a-Lago in Florida this week?

PS. Of course, Trump is Trump, and we should never completely ignore the possibility he will try to arrange a financial conference that could give to Mar-a-Lago the same type of historic fame that the Bretton Woods Conference awarded the Mount Washington Hotel. (What hotel owner would not love that?)

PS. Frankly, how can a country that blocks a search engine like Google has its currency included in IMF's SDRs?