Tags: Global | Savings | Said | Tied | U.S. | Current | Account

Global Savings Said Tied to U.S. Current Account Gap

Sunday, 13 March 2005 12:00 AM

"Over the past decade, a combination of diverse forces has created a significant increase in the global supply of saving - a global saving glut," Bernanke said in a March 10 address to a meeting of economists in Virginia.

Bernanke acknowledged that many economists ascribe the widening deficit to the low U.S. savings rate, or to growing trade competition from overseas. But he said a more likely explanation is that enormous savings from overseas are moving to the United States, attracted by the country's high productivity rate and the depth and sophistication of its capital markets.

The savings glut, he said, resulted in part from the Asian and Latin American financial crises of the mid-1990s. Countries became net exporters of capital as investors looked for better places to put their money and central banks built up "war chests" to protect against future shocks. The sharp rise in oil prices has also contributed to the savings glut, Bernanke said, as oil-producing countries invested revenues in U.S. assets.

"The underlying sources of the U.S. current account deficit appear to be medium-term or even long-term in nature, suggesting that the situation will eventually begin to improve, although a return to approximate balance may take some time," Bernanke said.

"Fundamentally, I see no reason why the whole process should not proceed smoothly," he added.

He said that to narrow the deficit the United States should encourage other countries to become borrowers again and should provide targeted help to improve their investment climate and strengthen their domestic financial institutions.

(USINFO)

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"Over the past decade, a combination of diverse forces has created a significant increase in the global supply of saving - a global saving glut," Bernanke said in a March 10 address to a meeting of economists in Virginia. Bernanke acknowledged that many economists...
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2005-00-13
Sunday, 13 March 2005 12:00 AM
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