The Business Section of the NYTimes ran an interesting story predicting an upcoming global recession. The threat? Not national debt, but international savings.
Bernanke, and other prominent economists, have blamed an over-abundance of saving as one of the main elements contributing to the housing market crash in 2008. Simply put, the global economy can only grow if consumption is high. If too large a portion of income is saved rather than spent, the economy slows. Furthermore, an unequal balance of savings in some countries creates problems for other countries. Savings take the form of investments, and a large international savings stockpile needs a market to invest in. For lack of quality markets to supply this demand, many of these savings are being put into very risky investments. This creates artificially low interest rates and a market bubble.
The U.S. has repeatedly called on the savings-countries, like the Asian tigers and Germany, to stop hoarding and start spending. However, from their perspective, it is good for the country to have a savings stockpile and make money off international investments. An over-abundance of savings is never bad for the country with the savings; only for the other countries who have not saved. The U.S., with its huge national deficit, is in a precarious situation right now.
However, what is the most realistic policy change right now: pressure other countries into spending more, or taking the initiative to become one of the countries who save more?