Global Saving Glut

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Originally posted by Colonâ„¢
Meh whatever. In 20 years time debate will probably still be raging whether this time period of low interest rates, a multitude of financial bubbles and US' current account deficit was the result of lax monetary policies by the major CB's or some apparently exogenous factor.

A debate on inflation is also to be expected. Surprisingly, A.Greenspan has just declared that the 2% target of inflation (undisputable credo of the Economically Correct) should be raised to 5% in a near future.

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Originally posted by Kidicious
Why cant there be a savings glut and lax monetary policy/bubbles?

Prudently, Bernanke let open the door for "other factors". Among those other factors, the decisions made by the Fed during the period reviewed in the speech have had likely some influence, particularly considering interest rates. But you certainly noted that the speech was delivered by the Chairman of the Fed.

[Kidlicious]

This is the situation the way I see it. The Fed keeps interest rates low in the United States to keep spending up (bubbles are a side effect). That should be inflationary, but it isn't, because of the high savings rate in the developing world.

So you have lax monetary policy/bubbles, and a global savings glut.