Paul Krugman: A Moveable Glut
http://www.nytimes.com/2015/08/24/opinion/a-moveable-glut.html?_r=1
Whats causing this global glut? Probably a mix of factors. Population growth is slowing worldwide, and for all the hype about the latest technology, it doesnt seem to be creating either surging productivity or a lot of demand for business investment. The ideology of austerity, which has led to unprecedented weakness in government spending, has added to the problem. And low inflation around the world, which means low interest rates even when economies are booming, has reduced the room to cut rates when economies slump.
Whatever the precise mix of causes, whats important now is that policy makers take seriously the possibility, Id say probability, that excess savings and persistent global weakness is the new normal.
My sense is that theres a deep-seated unwillingness, even among sophisticated officials, to accept this reality.
Partly this is about special interests: Wall Street doesnt want to hear that an unstable world requires strong financial regulation, and politicians who want to kill the welfare state dont want to hear that government spending and debt arent problems in the current environment.
But theres also, I believe, a sort of emotional prejudice against the very notion of global glut. Politicians and technocrats alike want to view themselves as serious people making hard choices choices like cutting popular programs and raising interest rates.
They dont like being told that were in a world where seemingly tough-minded policies will actually make things worse. But we are, and they will.