The Great Thrift Shift

If the global economy is growing, why are interest rates so low? If the US deficit has been skyrocketing since 1999, why are Americans still able to borrow money with impunity? The answer to both questions, as put forth by American economist Ben Bernanke, may lie in a "global saving glut." On its face, The Economist acknowledges that the idea of such a glut appears absurd: For one thing, the global savings rate has been falling for some time. It is possible, though, that investment (demand for savings) is falling even faster, and that what savings exists is disproportionately concentrated in the hands of nations that have become key financiers of American debt - nations like the People's Republic of China. Even if the "saving glut" exists, however, it is unclear when and how it will end - and it does not mean that a lack of fiscal discipline is not hurting the United States. In the first of a series of nine articles, The Economist examines how America's enormous current accounts deficit is possible - and whether it will remain possible for very long. – YaleGlobal