[A-List] Question for Henry Liu...
adsl675281 at tiscali.nl
Thu Jan 26 15:55:42 MST 2006
Henry, you argued:
Fed chairman-designate Bernanke argued in a speech last March 29, while
still a Fed governor, that a "global savings glut" has depressed US interest
rates since 2000. Echoing this view, Greenspan testified before Congress on
July 20 that this glut is one of the factors behind the so-called interest
rate conundrum, ie, declining long-term rates despite rising short-term
That foreign central banks end up holding larger dollar reserves can hardly
be viewed as national savings. (...) The exporting economies ship real
wealth to the United States in exchange for fiat dollars that cannot be
spent in their own economies without first being converted into local
currencies. If the local central banks exchange the trade surplus dollars in
their economy for local currencies, local inflation will result from an
expansion of the money supply (...) The glut Bernanke refers to is only a
dollar glut that in fact impoverishes the exporting economies. There is no
global savings glut at all. While the exporting economies continue to suffer
from shortage of capital, having shipped real wealth to the US in exchange
for paper that cannot be used at home, their central banks are creditors
holding huge amounts of dollar-denominated debt instruments. It is not a
global savings glut. It is a global dollar glut caused by the Fed printing
money freely to feed the gargantuan US appetite for debt. (...)
Couldn't there be both a dollar glut and a savings glut globally (you have
referred to sluggish final demand growth and excess capacity, due to
maldistribution of income) ? What evidence is there for a shortage of
capital in the exporting economies, or more precisely, what specific forms
do you think this shortage take in the exporting economies? Also, as the
dollar is the main currency used in international trade, then surely
dollar-denominated exports do not necessarily have to be "shipped to the US"
only - it affects all foreign trade?
Maybe you have time for a quick comment...
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