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Tuesday, April 26, 2005

The Global Savings Glut

This is a very enlightening Newsweek article:

We are all taught that saving is good—indeed, Americans are often chided for spending too much and saving too little. But what if the problem of today's global economy is that people elsewhere, in Europe, Asia and Latin America, are saving too much and spending too little? Former Princeton University economist Ben Bernanke argues that this is precisely the case. He calls it 'the global savings glut.' The power of a good idea is that it dispels common confusions. Bernanke's global savings glut is just such a notion. It helps explain (a) the huge U.S. trade deficits; (b) the weakness of the current economic recovery (now three and a half years old), and (c) the difficulty of doing anything about (a) and (b).
If you are at all interested in global economics, this is a must read.

2 Comments:

Blogger Andrew Watkins said...

Huh.

I am having a hard time processing this one.

Savings is bad? Excessive, near-gluttonous spending is good?

Huh.

4/26/2005 08:49:00 AM  
Blogger Dave Justus said...

It isn't that savings is bad or spending is good, it is that macro economic realities, largely out of American control, set up these events to happen.

America being awash with foreign money makes saving proportionately less attractive and spending easier.

4/26/2005 09:15:00 AM  

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