How Important Are Global Saving Imbalances?

MoneyMarketsHow Important Are Global Saving Imbalances?ByJames Broughel,Contributor.Forbes contributors publish independent expert analyses and insights. James Broughel is an economist focused on the economics of regulation.Follow AuthorMay 10, 2026, 06:55am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.Global imbalances are smaller than they were in 2007, but they have not disappeared.gettyFew topics in international economics dominated the policy conversation of the early 2000s as completely as global saving imbalances. The fear at the time was that the United States had become the borrower of last resort for the world’s excess saving, running current-account deficits on a scale that could not continue indefinitely, and that when the imbalance unwound, the adjustment might be abrupt and ugly. Two decades on, the imbalances are smaller and the rhetoric is calmer, but the underlying economics has not gone away. To see why, it helps to begin with an accounting identity. In an open economy, the current account reflects national saving minus domestic investment. A surplus country saves more than it invests at home and sends the difference abroad. A deficit country does the reverse. It invests more than it saves domestically and finances the gap by borrowing from abroad. That is why economists who study global saving imbalances usually begin with current-account balances.The phrase “global saving glut” is useful but somewhat misleading. The world as a whole cannot save more than it invests; one country’s surplus must be matched by another country’s deficit. The real question is where saving is generated, where investment takes place, and whether cross-border capital flows are productive and sustainable. The classic Feldstein-Horioka puzzle asked why domestic saving and investment remained closely linked despite open capital markets. The global-imbalances debate asked nearly the opposite question...