Update: And it was, in fact, Ian Fletcher. I’m not endorsing his overall views, but this was a good point.

A correspondent — whose email and name I have lost! — makes a good point. In talking about trade and secular stagnation, I described Germany, with its huge surpluses, as not a currency manipulator. As the correspondent said, however, the euro can be seen as a de facto foreign exchange intervention to keep the de facto Deutsche mark weak. Before 2008, the euro encouraged private capital outflows from Germany to the periphery. Since then, both official rescue packages and also lending among national central banks in the euro area can be seen as taking the place of these private flows. The interbank portion is shown in this chart from Pimco:

Photo

The general point is that if we imagine a euro breakup, I think everyone would agree that the new mark would soar in value, making German manufacturing much less competitive. The German public imagines that it is being cruelly exploited for the benefit of lazy southerners; arguably, what’s really happening is more like China’s purchases of dollars, which are intended not to subsidize America but to boost industry.