Americans are often chided for spending too much and saving too little. However, Robert Samuelson argues that the opposite is true: people elsewhere are saving too much and spending too little. This is causing a dangerous imbalance in global markets.
Many nations with large savings rates do not invest all of it domestically. A large amount goes abroad, including the United States. For example:
The flow of surplus global savings to the United States causes Americans to spend more and save less. According to Samuelson:
Consequently, the huge U.S. trade deficit is due to the rest of the worlds glut of savings. Increased American consumption sucks in imports, while weak foreign spending hurts American exports. In addition, converting foreign currencies into American dollars to invest here boosts the dollars exchange rate, making U.S. exports less competitive on global markets.
It is unlikely that the United States can fix the trade deficit unilaterally. Surplus savings are a result of poor domestic investment opportunities and government policies that discourage consumption.
Source: Robert J. Samuelson, The Global Savings Glut, Newsweek, April 21, 2005.
For text: http://www.msnbc.msn.com/id/7613508/site/newsweek/
For more on Trade Issues: http://www.ncpa.org/iss/tra/
FMF Policy Bulletin/ 7 June 2005
