The Global Savings Constraint

CHINA FINANCIAL - Report 05 Nov 2014 by Michael Pettis
Special points to highlight in this issue:China, and probably Japan, exist in a “neo-Fisherian” world in which, contrary to conventional thinking, lower interest rates and a depreciating currency are disinflationary, not inflationary. In economies in which most lending goes into production and most households are large net savers, lower interest rates or a depreciating currency puts downward pressure on consumption and upward pressure on production.In this light the BoJ’s easing last week is likely only to intensify the global battle to export excess savings into a world already suffering, ...

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