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long-term, but as a cumulative stock measure, the NIIP is slow
to reflect structural breaks in an economy's flow of funds.
The Eurozone's incomplete transition is palpable ... when plotting average 610
current accounts against the latest NIIPs for O3 2014 (Figure 7). All countries
except the euro-area are in balance, with their structural surpluses (deficits)
reflected ... positive (negative) NIIPs. The EMU cuts a lonely figure in the bottom-
right quadrants We also include South Korea, which scraped into the first quadrant
only last autumn following
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outflows to go
Figure 11: Pace of outflows determines how long j Figure 12. NIIP will not stabilize for years depending on size
adjustment wil€ take of Eurogiut
Ousletly ... current account
surplus even under extremely conservative assumptions as to the pace of NIIP
adjustment. The current pace of portfoko outflows is double the current account
surplus, explaining the recent ... pace of adjustment slows and that it would take a decade for the new NIIP
equilibrium to be reached, portfolio outflows would still exceed the current
account surplus, maintaining downward
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account
surpluses would tend to expand foreign wealth indefinitely, offsetting currency
appreciation means that NIIPs eventually stabilize. 2 This is the situation in which
Japan found itself during the 1990s ... However, in contrast to Japan in the 1990s, the Eurozone is nowhere near the NIIP
levels that would be consistent with its new equilibrium saving rate. It will take
trillions ... highly persistent global imbalances, the
two camps have accumulated large net international investment positions (NIIP),
but with opposite signs.
Upon its inception, the Eurozone joined the Anglo-Saxon cluster
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Report. Euroglut here to stay. trillions of outflows to go
[Figure 13 Korea's NIIP accelerated by Japan czation of BoK Figure 14. Debt reduction driven by transactions ... indebted than the
Euromne by the time it consolidated its external account, with the NIIP standing at
-50% of GDP, so the transition inevitably took longer than it will ... Eurozone.
What is remarkable about Denmark's case, nevertheless, is that its NIIP has not
stabilized since turning positive in 2009, despite exceeding 30% of GDP. As a
small open
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decades of large surpluses. Finland never
turned into a mature credit economy. The peak NIIP of 15% in 2010 failed to
generate considerable investment income to stabilize the current account ... foreign assets one day, it will probably
need to accumulate a much larger NIIP, similar to Japan, Norway, or Switzerland.
Conclusion
Since we first introduced our Euroglut thesis last September
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runs aground, again Reliance on foreign "Defeat of the Spanish Armada"
Euro inception capital, NIIP% of
Non-performing loans, GDP
la
Industrial % of total lending @Unit laborcost of
production Unemployment ... Philip James de Loutberbourg. 1796. UKNational Maritime Museum.
NIIP = Net International Investing-it Position. Sources: See appends. Greenish Hospital Collection, Depicts events from August 1588.
The 71% solution
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