They argue that current account balances reflect national savings and investment rates.

An economy s current account is the difference between its investment rate and its savings rate.

This enforced investment slowdown is itself increasing China s net savings, i.e., the current account surplus, while constraining the expansion of domestic consumption.

In 2007, the United States had a savings rate of 14.6 of GDP, but an investment rate of 19.6 , generating a current account deficit.

a reversal of the country s now rising income inequality lowering the very high savings level relative to investment and thus reducing the current account surplus

Broadly speaking, capital inflows led to real revaluation and a lower domestic savings rate relative to investment in the southern countries, resulting in structural current account deficits.

These savings are deposited into the WCO bank account.

Moreover, because dependence on foreign finance creates clear vulnerabilities, developing countries will seek to fund investment mainly from domestic savings, thereby limiting the size of their current account deficits.

Of course, China s savings rate will also decline, but Japan s experience since the 1980 s demonstrates how a sharp fall in investment can generate large and persistent current account surpluses, even when the savings rate is falling and the currency is appreciating.

In addition to more investment, India needs less consumption and higher savings.

Finally, Spaniards could borrow excess German savings and increase consumption and investment.

After all, savings and investment must be in balance globally, and if policy distortions cause savings in one country to rise faster than investment, the reverse must occur elsewhere in the world.

And, because there is no strategic reason to run large surpluses, with an excess of savings over investment, maintaining reasonable balance on the current account appears to be the preferred course.

Financial repression distorts choices by channeling savings to budget financing and away from investment.

Developing nations, the argument went, have plenty of investment opportunities, but are short of savings.

Lacking in savings and wanting to grow, the US runs massive current account and multilateral trade deficits in order to import other countries surplus savings.

Restoring America s savings investment balance implies a reduction in global aggregate demand of around 800 billion.

But what the world economy is facing is not a savings glut, but an investment deficiency.

In addition to providing more stability, bond markets are expected to stimulate domestic savings and investment.

First, countries with current account surpluses such as Germany, Japan and China must recognize that their own growth (and that of others) depends on reducing the global savings investment imbalance, which will result in narrowing external deficits elsewhere.

That, in turn, may cause higher investment or asset bubbles, as businesses seek to reinvest their savings somewhere.

In short, Japan s national savings still exceed its domestic investment, allowing Japan to be a net capital exporter.

Its debtors and creditors are all members of the same, wealthy currency union, whose current account surplus with the rest of the world means that it is a net exporter of capital (that is, domestic savings exceed domestic investment).

In fact, households account for 65 of India s national annual savings, compared to under 40 in China.

The problem of current account imbalances is closely linked to the existence of a world savings glut.

Similarly, European countries account for 75 of direct investment in Russia.

The German operations naturally generate a surplus of funds (given that savings in Germany far exceed investment on average).

Moreover, a lot of emergency government spending on current items is really best seen as national savings and investment.

At the same time, since returns to capital are kept low by high wages, very little investment occurs. The excess of savings over investment flows abroad as capital exports.

The continent needs measures that are designed to encourage savings and investment, improve labor utilization, and upgrade failed educational systems.

Rather, savings should be channeled even more and more efficiently to domestic investment in order to avoid large external imbalances.

This would require politically difficult shifts in consumption and investment, with America increasing its savings and China increasing domestic consumption.

Despite severe financial repression, it has experienced extremely high savings and investment, owing mainly to Chinese households strong propensity to save and massive government driven investment, particularly by local governments.

Reducing individual tax rates and taxes on savings and investment at best fosters modest increases in employment, work effort, and income.

Foreign capital inflows would allow them to draw on the savings of rich countries, increase their investment rates, and stimulate growth.

That will have a very significant effect in terms of reducing the current account surplus, which reflects net national savings.

Most of its savings were being invested abroad, and its domestic net investment share was among the lowest of all OECD countries.

The economy can then use household savings (with appropriate financial intermediation) to finance corporate and government investment, rather than the US government.

That would have put a partial brake on growth in asset prices, raised savings, reduced investment, and probably lowered the trade deficit.

That sounds like an attractive proposition but someone must make the initial investment in exchange for a claim to the later savings.

For decades, China has been investing its vast savings abroad, waiting for greater efficiency in domestic investment allocation before starting to dissave.

The world may enter a new era in which investment demand exceeds desired savings which means that real interest rates must rise.

The last time China saw such high growth in domestic investment, the savings rate was not as high as it is now.

Currency appreciation, Japan argued then and China argues now, is unlikely to result in a significant current account adjustment, which requires addressing not only China s high savings rate, but also low savings in the US.

Ben Bernanke, the US Federal Reserve chairman, once famously pinned the whole US current account deficit on a global savings glut.