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Dear Sir,

Martin Wolf ("Asia's Revenge", 9 October) brings up again the "savings glut" theory to try to partly exonerate Western financiers from their follies. While Asia's mercantilist policies, and their very real desire to no longer have capital account deficits are very real, their savings "glut" has been fully created by policies in the West. Central Banks, led by Alan Greenspan's Fed, maintained absurdly low interest rates despite massive evidence of asset bubbles; in fact, these bubbles were a desired result, as they allowed for massive profits by the financial sector, and made it possible to hide from the general population the stagnation of their incomes caused by other parallel policies such as labor market deregulation. Fundamentally, people in the West lived above their means. Together, these policies created an appearance of prosperity for all (GDP was up, on the back of strong income growth at the top) while effectively organising a vast transfer of wealth from the many to the few. The Asians were happy to tag along, as it allowed them to develop their infrastructure and economies, but it is unfair to blame them for the fact that the much touted prosperity of the past years in the West was essentially fake.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Oct 9th, 2008 at 06:25:14 AM EST

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