Yanis Varoufakis, the current finance minister of Greece, talks about a "surplus recycling mechanism", a term he coined and uses to describe (as I understand it) a relief valve for economies running a surplus.
While I haven't read his book, I watched some of his talks and read his blog posts. I couldn't quite figure out what he means by this. Could someone please explain what he means by "SRM", and why he considers it important, crucial even, to prevent major recessions?
Here's what I've figured out so far. The surplus being talked about is the trade surplus. That is, countries which export more goods than they import run a surplus, and get a net influx of cash (or, in the past, gold). This cash can either be hoarded, or reinvested. Internal expenditure is ignored as irrelevant, as only the interactions between countries are being looked at. If hoarded beyond a certain breaking point, bad things happen. A surplus recycling mechanism compels a country to reinvest the cash overseas.
Or so it seems. Is my understanding of what "SRM" means correct? Also, if so, according to Varoufakis (or Keynes, who apparently had the exact same realisation around WW2 time), how exactly does hoarding without bound cause bad things / recession?
It would also help to know whether Varoufakis' ideas / interpretations are widely accepted by mainstream economists, currently being debated, or are a fringe/minority view.