FRIES: Other economists that I’ve have talked to about this myth or prejudice that ‘surplus countries are good’ and ‘deficit countries are bad’ explain that at the world level – income equals demand. So at the national level when a country like Germany runs a surplus that means their level of demand is below their level of income. Do you agree with that?
FLASSBECK: Absolutely. They’re living below their means, as we say. Germany’s living below its means. It spends less than it could and should. And that means other countries are lacking demand. So a country like France that has a deficit with Germany is lacking demand from its own savers; it’s lacking demand from its own companies; and it’s lacking demand from the foreign trade, in foreign trade. And that means it’s overall lacking demand. So who could compensate for that? There’s only one group left logically and this is the government. So the government has to go and create demand so to say, by living beyond its means. The government has to spend money, as some stupid people in Germany say the government spends money that it doesn’t have. But this is exactly what is needed. The government has to spend money that it doesn’t have. Because all the others have money but they do not spend. This has to be compensated. Otherwise any economy in the world would collapse in a very short time. So this is obviously what we have to learn. This is macro economic logic. Call it logic; it’s bookkeeping more or less. But unfortunately, it’s not understood by very many people. And it’s not understood by the majority of our traditionally trained neoclassical economists.