Mon Aug 24th, 2015 at 08:32:42 AM EST
Also sprach Krugman:
... More than a decade ago, Ben Bernanke famously argued that a ballooning U.S. trade deficit was the result, not of domestic factors, but of a "global saving glut": a huge excess of savings over investment in China and other developing nations, driven in part by policy reactions to the Asian crisis of the 1990s, which was flowing to the United States in search of returns. He worried a bit about the fact that the inflow of capital was being channeled, not into business investment, but into housing; obviously he should have worried much more. (Some of us did.) But his suggestion that the U.S. housing boom was in part caused by weakness in foreign economies still looks valid.
What's causing this global glut? Probably a mix of factors. Population growth is slowing worldwide, and for all the hype about the latest technology, it doesn't seem to be creating either surging productivity or a lot of demand for business investment. The ideology of austerity, which has led to unprecedented weakness in government spending, has added to the problem. And low inflation around the world, which means low interest rates even when economies are booming, has reduced the room to cut rates when economies slump.
Back in 2008, Migeru wrote a pretty intense diary about the global savings glut theory. Both it and the ensuing comments were generally beyond my comprehension. But the sense I got was that most people were not too persuaded by the global savings glut theory, while it had already won me over when I first learned about it as The Giant Pool of Money on one of the most popular episodes ever of This American Life.
Won't comment more on this other than to ask whether the focus on China then could at all be related -- upside-down -- to the focus on China now.
[editor's note, by Migeru] Previous ET content on the savings glut theory
- The Global Savings Glut that will not die by marco on August 24th, 2015
- Something is afoot by Migeru on July 28th, 2010
- Revenge of the Savings Glut Theory? by JakeS on June 9th, 2010
- Europe is doomed! Special Decline and Defeatism edition by Jerome a Paris on December 14th, 2009
- Ascent of Money by das monde on September 1st, 2009
- Geithner and Summers launch financial regulatory reform by Jerome a Paris on June 15th, 2009
- all is back to normal on the economic front by Jerome a Paris on June 2nd, 2009
- The Cusp Of History by afew on February 4th, 2009
- Savings glut vs income shortage by Jerome a Paris on January 8th, 2009
- Paulson pushes to blame "savings glut" by Jerome a Paris on January 3rd, 2009
- making sense of the financial crisis: Anglo Disease, debt and counterfeit money by Jerome a Paris on December 26th, 2008
- Musings on the savings-glut theory by Migeru on October 17th, 2008
- FT LTE: Much-touted prosperity of the west was fake by Jerome a Paris on October 13th, 2008
- The "savings glut" theory rears its ugly head again by Jerome a Paris on October 9th, 2008
- Grrr... Martin Wolf still blames the Chinese for the Anglo Disease by Jerome a Paris on June 18th, 2008
- LQD Punctuated Equilibrium (aka Catastrophism) by melo on June 16th, 2008
- Tiptoeing around the Anglo Disease by Jerome a Paris on January 26th, 2008
- Liu: No Choice Now But Depression or Hyperinflation by NBBooks on January 26th, 2008
- So many ways to avoid the truth by Jerome a Paris on January 24th, 2008
- Two economists, three opinions by Jerome a Paris on January 9th, 2008
- Bubbles Greenspan: "Mission Accomplished" by Jerome a Paris on December 12th, 2007
- Anglo Disease - early signs of hangover generate denial by Jerome a Paris on November 22nd, 2007
- Financial crash: blaming the victims by Jerome a Paris on August 22nd, 2007
- The Carry Trade: Borrowing from Yoshi to Pay Ahmad and Ping by LondonYank on March 15th, 2006
- Bernanke faces tough year as he replaces 'Bubbles' Greenspan by Jerome a Paris on December 19th, 2005
- Running out of options by Jerome a Paris [Edit User] Mon Aug 15th, 2005