The Impact of Deliberate Policy Decisions on Current Account Surplus Countries

If you transfer $100 from an ordinary household to a rich household, you get a net reduction in consumption because rich people consume a much smaller share of their income. So what does that mean? That means that you can find yourself in a position where you are producing far more than local households can afford to consume. And that's usually worsened by a reduction in private sector investment - and we saw this clearly in Germany after 2003. You get a reduction in consumption and a reduction in investment. Now what are the options there? There are two things: export the excess production or fire workers.