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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Elroy Jetson who wrote (87084)9/29/2007 7:58:03 PM
From: arun gera  Read Replies (1) of 110194
 
>the "worldwide savings glut" are so divorced from the underlying facts.>

Another view

imf.org

>Some call this a new world order. I see the situation as a temporary but effective response to crisis. It is somewhat misleading to term this situation a "savings glut" for that would imply that countries running current account surpluses should reduce domestic incentives to save. But if the true problem is investment restraint, then a reduction in world savings incentives will engender excessively high real interest rates when the factors holding back investment dissipate. Put differently, I think it is best to see the underlying cause of current account surpluses as inadequate investment rather than excess savings, because the desirable policy response is to improve the investment environment rather than cut back on savings.

The world now needs two kinds of transitions. First, consumption has to give way smoothly to investment, as past excess capacity is worked off and as expansionary policies in industrial countries return to normal. Second, to reduce the current account imbalances that have built up, demand has to shift from countries running deficits to countries running surpluses.>
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