Tuesday, March 30, 2010
Was the global savings glut an effect of the bubbles, not a cause?
Ben Bernanke's explanation for why we had a housing bubble is that it was caused by a global savings glut, coming from China and the Middle East. Apparently, some economists are arguing that cause and effect go the other direction. That is, the stock and housing bubbles caused excessive American consumption, which in turn caused more saving in China and the Middle East.