It has been nearly 15 years since Ben Bernanke, the former Federal Reserve Chairman, said that the global savings glut has fueled the massive current US account deficit.
But many things have changed since then. The US deficit narrowed, the surpluses of oil exporters dwindled, and central banks everywhere expanded dramatically in their balance sheets.
However, another global feature that Bernanke touched on at the beginning of 2005 is still very familiar: Asia’s stock of savings which is still huge and its size will increase annually.
For East Asia as a whole, total domestic savings add up to 35% of GDP annually, and little has changed over the past three decades.
And the British “The Economist” magazine stated that Bernanke’s concern at the beginning of the twentieth century was about the cash surplus in Asia that was flowing to the bond markets in the United States and abroad, causing real interest rates to decrease in the long run.
When the global financial crisis erupted in 2008, some economists pointed to the glut of Asian savings as the underlying reason for the housing market’s transition from an economic boom to a Great Depression, but with interest rates now low, some still ask again whether excessive savings in Asia exacerbates the problem of the global economy.
There are certainly many global shouts for 15 years. High savings rates in Asia continue to shift to large current account surpluses. The average current account surplus in East Asia has reached about $ 525 billion annually during the past five years, which is a monetary value above the average recorded in the five Years prior to the global crisis.
The magazine reported that the distribution of the surplus had shifted. The surplus of China reached its peak a decade ago, while the surpluses of South Korea and Taiwan were greater than usual.
She pointed out that the current account surplus in the major economies in Asia contributes about 0.6% of global GDP, which is almost equal to the surplus of the economies of Europe combined, including Germany.
It is one of the major global cross-border flows that affect asset markets and shrink returns globally, said Brad Seetser, an economist at the Council on Foreign Relations in New York.
In the early years of the twentieth century, the focus was on currency reserves in Asia, especially China, most of which ended up in safe assets, such as US Treasury bonds, but now, a large number of Asian investors are directing household and corporate savings to global markets, but the impact These steps can be more visible in some sectors.
According to the International Monetary Fund, Taiwanese life insurance companies own 18% of all dollar denominated debt issued by non-US banks, and Japanese banks own approximately 15% of globally guaranteed loan obligations, which are potentially fraught with corporate debt risks.
South Korea’s National Retirement Fund, the world’s third largest, has nearly $ 600 billion in assets, and plans to double its investment in foreign bonds over the next five years.
However, the continuous rise in Asian savings still appears less harmful than other angles, and more importantly, it is not accompanied by the same degree of interference in exchange rates to maintain currencies as was the case at the beginning of the current century.
In most parts of Asia, the level of tolerance of strong currencies has increased. Of the 60 economies tracked by the Bank for International Settlements, only 16 economies, seven of them Asian, have witnessed a real increase in currency exchange rates by more than 5% since 2010.
In addition, some countries have taken important steps to make their interventions in the currency markets more transparent, and the US Treasury has welcomed the decisions of South Korea and Singapore to start publishing regular data on any action they take in these markets.
However, there were other countries that intervene heavily in the currency markets. For example, Vietnam and Thailand began to accumulate foreign exchange reserves at a rapid pace, and it is believed that it will be possible for Taiwan’s currency reserves to be 40% larger than the official one announced, because the central bank there does not Submit any report or reports of his exposure to financial derivatives.
There is a broader question about whether Asia should be blamed for its saving tendency, but given Singapore, which has a current account surplus of 18% of GDP, it has resisted such criticism, and the International Monetary Fund has argued that the country’s external position is stronger Much of what the basics require, and the government has called for more on infrastructure and social security, which could help reduce citizens ’savings savings.
Prior to the mid-1980s, Singapore was running a deficit in its current account regularly, but achieved a surplus after that when it turned into a good demographic spot with a large number of workers and a smaller number of retired residents. However, the country expects its surplus to decrease in the coming years with The population is aging, as household savings will decrease and the government will face increasing costs for health care.
The dynamics of price aging China, South Korea, and Taiwan are likely to be similar to those in Singapore.
Meanwhile, economists continue to ask questions about the amount of blame that Asian savers should be blamed for global financial turmoil, especially since many other things were lurking behind that crisis, including lenient mortgage systems in the United States and troubled banks in Europe, which is hated