Situation where desired saving exceeds desired investment
A global saving glut (also GSG,[1][2]cash hoarding,[3][4][5][6][7][8]dead cash,[9]dead money,[10]glut of excess intended saving,[11] or shortfall of investment intentions)[11] is a situation in which desired saving[notes 1] exceeds desired investment.[12] By 2005 Ben Bernanke, chairman of the Federal Reserve, the central bank of the United States, expressed concern about the "significant increase in the global supply of saving" and its implications for monetary policies, particularly in the United States. Although Bernanke's analyses focused on events in 2003 to 2007 that led to the 2007–2009 financial crisis, regarding GSG countries and the United States, excessive saving by the non-financial corporate sector (NFCS) is an ongoing phenomenon, affecting many countries.[13][14][15][16] Bernanke's global saving glut (GSG) hypothesis[17][18] argued that increased capital inflows to the United States from GSG countries[notes 2] were an important reason that U.S. longer-term interest rates from 2003 to 2007 were lower than expected.[12]
A 2007 Organisation for Economic Co-operation and Development (OECD) report noted that the "excess of gross saving over fixed investment (i.e. net lending) in the "aggregate OECD corporate sector" had been unusually large since 2002.[13] In a 2006 International Monetary Fund report, it was observed that, "since the bursting of the equity market bubble in the early 2000s, companies in many industrial countries have moved from their traditional position of borrowing funds to finance their capital expenditures to running financial surpluses that they are now lending to other sectors of the economy".[14] David Wessell in a Wall Street Journal article observed that, "[c]ompanies, which normally borrow other folks’ savings in order to invest, have turned thrifty. Even companies enjoying strong profits and cash flow are building cash hoards, reducing debt and buying back their own shares—instead of making investment bets."[4] Although the hypothesis of excess cash holdings or cash hoarding has been used by the OECD, the International Monetary Fund and the media (Wall Street Journal, Forbes, Canadian Broadcasting Corporation), the concept itself has been disputed and criticized as conceptually flawed in articles and reports published by the Hoover Institute, the Max-Planck Institute and the CATO Institute among others.[19][20][21] Ben Bernanke used the phrase "global savings glut" in 2005 linking it to the U.S. current account deficit.[17]
In their July 2012 report Standard & Poor's described the "fragile equilibrium that currently exists in the global corporate credit landscape". U.S. NFCS firms continued to hoard a "record amount of cash" with large profitable investment-grade companies and technology and health care industries (with significant amounts of cash overseas), holding most of the wealth.[15]
By January 2013, NFCS firms in Europe had over 1 trillion euros of cash on their balance sheets, a record high in nominal terms.[16]
^The Economist 2005.
^Samuelson 2005.
^Bary 1998.
^ abWessell 2005.
^Sanchez & Yurdagul 2013.
^Walsh 2012.
^Bloomberg 2012.
^Kleisen 2013.
^Canadian Press 2012.
^Isfeld 2014.
^ abGreenspan 2010.
^ abBernanke et al. 2011.
^ abOECD 2001.
^ abCardarelli & Ueda 2006.
^ abChang et al. 2012.
^ abWilliams 2013.
^ abBernanke 2005.
^Bernanke 2007.
^von Weizsäcker 2011.
^Borio & Disyatat 2011.
^Taylor 2008, p. 4.
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