One result of the boost to global savings over the past decade has been the downward pressure on the real rate of interest.

The freeing up of international trade in goods and services and of capital has contributed to the expansion of international trade both of goods and services and capital to the mutual benefit of buyers and sellers. The growth of global savings is matched by the growth in global investment. Some countries have become larger net savers and effectively are selling securities today in exchange for goods and services in the future. Other countries on the other side of the transaction are buying securities today to fund investment to increase production in the future in exchange for selling goods and services in the future to repay the borrowed savings. Provided that individual countries and global institutions continue to favor free trade in goods and services these mutually beneficial exchanges between countries can be expected to increase.

Three categories of countries have contributed to the current global glut of savings. The oil-exporting countries including Russia Norway and those in the Middle East have saved much of their windfall income gains from the more than doubling of crude oil prices and the increase in quantities. Some of the advanced developed countries where the population is ageing have increased saving for future retirement incomes and they have had relatively reduced domestic investment opportunities. This category includes Germany Japan Switzerland and the Netherlands. A number of the East Asian countries including China Singapore Taiwan South Korea and Hong Kong have high investment rates but also very much higher saving rates.

Partial explanations for the high saving rates include the rapid growth in income with consumption lagging and self-saving to fund prospective education health and aged care expenses. On the other side of the global capital market there have been two sets of countries with good investment prospects that have exceeded domestic saving. A number of the transition economies in Eastern Europe and countries such as Spain which are experiencing rapid economic growth via high investment rates and the catch-up on world best practice technology are net borrowers. The second group of borrowers on the world capital market are the Anglo-Saxon countries including the US Australia and the UK where policy changes have supported large scale productive investment and sustained economic growth.

The Analyst Magazine, Global Savings Glut, International Trade, Global Capital Market, Global Investments, Global Financial Services, Consumer Goods and Services, Global Economy, Interest Rates, Stock Exchange Markets.