Excess Asian savings are weighing on global interest rates

IT IS NEARLY 15 years since Ben Bernanke, then the chairman of the Federal Reserve, argued that a “global saving glut” had fuelled America’s giant current-account deficit. Much has changed since then. The American deficit has shrunk, oil exporters’ surpluses have dwindled and central banks everywhere have dramatically expanded their balance-sheets. But another feature of the world that Mr Bernanke described in early 2005 looks strikingly familiar: Asia’s stockpile of savings remains enormous, and it is getting bigger by the year.For East Asia as a whole, each year gross domestic savings add up to 35% of GDP, and little has changed over the past three decades (see chart). This is not just an academic curiosity. Mr Bernanke’s concern in the early 2000s was that Asia’s excess cash was flooding into bond markets in America and beyond, depressing long-term real interest rates. When the global financial crisis erupted in 2008, some economists pointed to the Asian saving glut as an underlying cause of the housing boom and bust from Las Vegas to Dublin. With interest rates even lower now, some are again asking whether excessive saving in Asia is storing up trouble for the global economy.
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