Is There a Glut of Saving? Following Ben Bernanke, the chairman
of the Council of Economic Advisers, in his testimony to the
Congress on July 20,2005, Fed Chairman Alan Greenspan said that
it is quite likely that we are currently experiencing a global
savings glut. Agreeing with Bernanke, the Fed chairman views
this glut as one of the factors behind the so-called interest
rate conundrum, i.e., long-term rates have been falling despite
the tight interest rate stance of the Fed. This savings glut,
according to many commentators, has been instrumental in the
very low mortgage interest rates, which have pushed the housing
market to new highs. The housing boom in turn has lifted
consumers’ wealth and in turn boosted their expenditure and
thereby kept the US economy going. Indeed the International
Monetary Fund (IMF) seems to support the Fed chairman’s view.
According to the IMF the World is flooded with savings. The IMF
has estimated that world savings as a percentage of world GDP
stood at 25.4% in 2005, which tra