Your morphing global savings glut

Bond yields be depressed for global savings appear to be re-glutted. If you’ve been paying attention you’ll probably have noticed.

From SocGen:

The global savings glut is reviving after a period of hibernation following the global financial crisis (GFC).The absolute level of East Asian current account surpluses in nominal US dollar terms has climbed beyond the previous high in 2006, while the rise of Western European surpluses has been striking…

The global savings glut went into hibernation after the 2008 global financial crisis (GFC), but it is awakening. The phrase “global savings glut” was made famous by Ben Bernanke in 2005, when the yawning US current account imbalance drew widespread attention. The chief distinction between the pre-GFC glut and its current incarnation is that surpluses have become more concentrated in certain regions, while current account deficits have become relatively more diffused. In 2006, for example, the US accounted for the lion’s share of the world’s current account deficit in US dollar terms, but this dominance has receded markedly.

The same three countries (China, Japan and Germany) headed the list of the Top 12 current account surplus countries in 2006 and 2016, but Germany climbed to the top spot in 2016 as its nominal surplus in dollar terms almost doubled. However, the contribution of the main East Asian surplus economies to the total global surplus has risen to over 50% currently (Chart 1). By contrast, major oil exporters such as Saudi Arabia, Kuwait, Norway and Nigeria that were on the 2006 list have dropped out of the 2016 list. Russia is the only major oil-producer that remains on the Top 12 surplus list (Table 1).

You’ll notice the euroglut thesis in play, with Germany leading the way, in the SocGen charts:

It’s a reminder, as Matt put it before, that the US shouldn’t blame Mexico for “losing” at trade — it should blame Germany. Of course, blame doesn’t help very much and solutions are hard to come by. Asking an ageing Germany to raise wages more quickly and to spend more on itself hasn’t worked so far but you never know…

It’s also a reminder that China’s surplus is growing despite its domestic investment push, even if it’s not as big as its savings rate suggests it should be.

Finally, you’ll notice the Saudi (petrodollar) reversal, alongside the general presence of EMs hit by the commodity reversal, in the deficit chart. Hat tip to Russia for remaining at the bottom of the surplus chart above:

Related links:
Corporate surpluses are contributing to the savings glut – FT Wolf
Michael Pettis explains the euro crisis (and a lot of other things, too) — FT Alphaville
Global macroeconomic imbalances are shrinking (and not) – FT Alphaville
That euroglut outflow and the real Japanisation of Europe -FT Alphaville
Behold the euroglut – FT Alphaville

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