What is global saving glut?
Global saving glut refers to when desired saving exceeds desired investment. Also referred to as cash hoarding, dead cash and dead money, global saving glut essentially describes the problems arising from countries saving more than they spend, leading to slower near-term economic growth.
Key takeaways
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Global saving glut occurs when desired saving exceeds desired investment, also called cash hoarding or dead money.
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Ben Bernanke introduced the concept in 2005 to explain U.S. current account deficit; recently applied to China, Japan, and Korea.
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Countries saving more than spending causes slower economic growth, downward pressure on interest rates, deflation, and weaker stock market performance.
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Primary drivers include desire to reduce debt, ageing populations, and low investment demand in both developed and emerging markets.
Where have you heard about global saving glut?
Global savings glut was first raised as a concept by Ben Bernanke in 2005 to account for the U.S. current account deficit. The theory has also been used to describe the state of China, Japan and Korea in recent years.
What you need to know about global saving glut.
Global saving glut describes the issues caused when a country saves more than it spends, leading to slower economic growth and a downward pressure on deflation, interest rates and weaker performances within the stock market. Ultimately, spending drives economic growth, so when a country saves more than it spends, there can be economical consequences. Primary drivers originate in both developed countries and the emerging market (EM) with common factors including a desire to reduce debt, ageing populations and a low demand for investment.