According to the US Treasury, Europe’s only large, functioning economy is actually the source of the world’s problems. Germany’s current account surplus, the Treasury claimed in an Oct. 30 report to Congress, is the source of Europe’s and a good deal of the world’s woes. If only the stingy Germans would import more from other countries and export less, the world would be better off.

Excuse me? Just what is Germany supposed to import? Spanish cars, perhaps? Germany is importing tens of thousands of Spanish engineers and other skilled personnel because it can put them to productive work. Germany can’t find enough workers and is a magnet for qualified immigrants from Europe and the world.

Historical Data Chart

Europe is in trouble because its Romance-language-speaking countries increased wages by 25% or more between 2000 and 2009 and borrowed massively to pay for it, running big current account deficits to fund consumption. Germany geared its industry to export to China, where its car companies lead the market and its machine tools are found in every factory. Germany has an aging population. It has to save a great deal to fund coming retirements. Countries with aging populations and high savings requirements are supposed to export more and save the proceeds, as Nobel Laureate Robert Mundell explained a quarter-century ago.

If only Germany had followed the Keynesian policies that have proven so successful in the United States….