Going by elementary macroeconomic principles, currency unification will always result in "dead zones," because their exchange rates can't stabilize the balance of trade.
For a definition of “work” which normalises constant financial crisis.
Financial crises are characterised by assets suddenly losing their nominal value. Our dying towns are in structural decline. Not financial crisis.
What really means that no, economical dead zones have no relation at all with the balance of trade. And also, the balance of trade predicts almost nothing and is controllable by policy, anybody focusing on it is just throwing a red herring and hopping people don't look at actually important things.
(What doesn't mean that currency unification doesn't cause dead zones. I know that this explanation is wrong, I don't know if it happens or not.)
Which should be considered the normal state for an economy that with growth and production.
The issue is that a negative trade deficits are sustainable, but come directly out of the wealth growth of the importing country.
If you have $2 of value per year, and loose net $1 across the boarder, you never accumulate wealth.
A subsistence farmer can grow enough for themselves. It they make extra each year, they can buy something from outside each year, continually running an import deficit.
No country accumulates money in any significant way. Neither loses it.
Im talking about wealth, GDP, capital, and trade. These things are measured in currency, but saying a country is hording a currency.
If country A uses all of its surplus production beyond subsistence to import alcohol from country B, and country B invests all that money on education, infrastructure, and productive capital, you would expect different outcomes.
Country A can humm along with a perpetual trade deficit forever, but there is an opportunity cost.
If you meant to talk about wealth, real GDP, and real capital, you can... you know... reference those things on your text. Because every single thing upthread is nominal and about money changing hands.
Do you want to know how Portugal can get a positive trade balance (a nominal concept)? They just need to kill tourism and the unbalanced inflow of salary and pensions. Just destroy their natural and cultural attractions and make the place so bad to live that no foreigners will want to go there. Easy.
Now, we can talk about opportunity costs...
A trade deficit is buying more goods and services from outside than are sold outside.
I was trying to explain to you how a negative trade balance can be sustained, but it seems like you dont want to hear it.
Take care.
People late in their careers are buying imports, people early in their careers are leaving the country. That's as clear of a case of the integral going negative as I can imagine.
People leaving the country carrying money is an example of those "other means", people buying imports isn't.
Either way, it's a bad number to even look at. It meaningless.
That said, leaving the Euro would be too economically traumatic for Greece at this point.
But if Portugal imports too much from France and exports too little, and they're both using the euro, then there is no exchange rate to adjust, and so you're just left with the trade imbalance and no adjustment.
I would question how well that works outside completely generic goods that you can buy anywhere, since with economies of scale consolidating production there is often hardly any alternative anymore.
Also, feels like there could be a way to manually address the balance without reducing people's standard of living.
Eventually those in Portugal will not have enough wealth to import above their exports, depending on how much stored wealth they have in aggregate.
So it’s still guaranteed to balance out on a century timescale…
>So it’s still guaranteed to balance out on a century timescale…
Balance in what sense? In terms of trade, countries can perpetually run a deficit if they share a currency. Wealth isnt zero sum and is continually created. This can be used to pay a perpetual deficit at a cost to growth.
I dont understand your question.
Imagine of two families. Whenever one gets money, it buys food from the other. The 2nd keeps taking the money and investing in their garden, making it bigger and more efficient.
IF they share a currency,
Eventually one party will exhaust all their available resources, be that money, gold, desirable trade goods, trust, credibility, etc… and won’t be able to run a deficit anymore.
Lets say you, with your human labor, can use 10 bricks to produce 20 bricks. If you do this every year, your wealth grows. first 10, then 20, then 40, then 80, ect.
In this senario, You can trade with your neighbor and run a 10 brick deficit every year, but you wont exponentially grow your production and wealth. You will have 10 the first year, make 20, trade away 10, then end up where you started. You are sustainable forever, but not growing.
Your house will remain small, and the house of your trading partner will grow ever larger.
Be that quality, quantity, availability, pricing, etc…
Eventually Portugal will exhaust all it’s bricks, and future brick opportunities, that are better in some aspect, relative to French bricks and French future brick opportunities.
And when that happens with every possible thing and opportunity in Portugal, relative to French things and opportunities, then the trade deficit naturally disappears.
That is beside the point of what the long term consequences of running a trade deficit are, if they are sustainable, and how currency exchange impacts these factors.
Humans create new value through labor. It is a renewable resource and you don't run out.
Currency markets are mostly too big for governments to be able to manipulate (e.g. George Soros & GBP).
If a government wants to address a trade imbalance then import tariffs is one way to do it - or policy changes affecting cost of goods produced for export.