Thread by @Brad_Setser

My suggestions for how the IMF can strengthen its surveillance of surplus countries can be found here --

The ideas are from last December. But they haven't lost relevance. Asia's savings glut hasn't gone away. Nor have German and Dutch surpluses ...

imf.org/en/News/Semina…

I was particularly critical of the IMF's relatively soft surveillance of centers of corporate tax arbitrage that have large budget surpluses and a history of intervention in the foreign exchange market. Such countries shouldn't be lauded as models other countries should emulate.

I also noted that the IMF has a history of prematurely lauding European surplus countries (including those that also act as corporate tax centers) for easing fiscal policy ...

See any fiscal loosening in the Netherlands in 2018 or 2019? I don't ...

The basic policies needed to reduce flow and perhaps as important stock imbalances aren't a secret --

a) the Asian NIEs need to stop intervening to block currency appreciation (and stop encouraging their lifers and pensions to take fx risk) + ease fiscal.

b) the European surplus countries need to raise public investment and cut taxes on low wage labor;

c) And China needs to radically expand its social safety net and reduce taxes on low-wage work while building a more progressive tax system with more income tax revenues.

Lots of win-wins there --

the ask in each case is for policies that raise living standards in the surplus countries ...