One sure way to reduce the savings rate in China would be to develop an American style mortgage market there.

Nine out of 10 either cannot save through their 401 plan, decide not to save or don't decide or save too little.

The absence of no money down mortgages might be more important than Confucian ethics in explaining China s high savings rate.

Mortgage lending, however, is a long standing activity for commercial and savings banks, mostly unaffected by Glass Steagall or its repeal.

The United States has no compulsory saving plan, and it has an abysmally low in fact, negative personal saving rate. But the government is loath to consider a mandatory saving plan.

It would take too long to work out the conflicts to include a mortgage modification scheme in the rescue package.

The fires of the US sub prime mortgage crisis were stoked not just by domestic regulatory failures, but also by a global saving glut, which sent banks on a wild goose chase for yield.

The Germans want the ECB to focus only on large systemic banks, and leave smaller savings banks (like those that invested heavily in subprime mortgages) to national authorities.

The United States has no compulsory saving plan, and it has an abysmally low in fact, negative personal saving rate.

Automatic Savers

America s Saving Surprise

Japan s Savings Crisis

Savings rates shot up.

Demand savings accounts

Term savings accounts

Saving. A domestic saving rate in excess of 50 has served China well.

Both the savings shortage and savings glut hypotheses confuse accounting outcomes with causes.

Paying down debt on credit cards or mortgages also counts as saving but increases in the value of existing assets like stocks or real estate do not, even though they increase the value of household wealth.

Most countries have introduced some form of forced savings (such as compulsory contribution to pension and provident funds) and provide tax incentives to stimulate long term household savings.

But if employers actually enroll their employees automatically in the plan, telling them that they can drop out at any time simply by notifying the employer, a large majority of employees will just accept the plan.

The housing recession the worst in US history and worsening every day will eventually see house prices fall by more than 20 , with millions of Americans losing their homes.

Balancing China s High Savings

In other words, the government s negative saving is being financed by the private and household sectors positive saving.

The Right Weights for Mortgage Risks

Occupy the Mortgage Lenders

America s Saving Rate and the Dollar s Future

Too Much Saving, Too Little Investment

So far, the sub prime crisis has had a limited direct impact on Latin America s mortgage markets.

Instead, they need to be part of a convincing overall plan that combines responsible state intervention with relief of the financial burdens of individual citizens, as well as savings in public budgets.

Saving may also take the form of individual contributions to retirement accounts or employer contributions to corporate saving plans.

Losses are spreading from sub prime to near prime and prime mortgages, commercial mortgages, and unsecured consumer credit (credit cards, auto loans, student loans).

Shlomo Benartzi Saving for tomorrow, tomorrow

Cut Now, Save Later

Talk abounds of a global savings glut.

Why Are Savings Patterns So Different?

The Constitution, Land Law and Law on Marriage and Family provide for equal rights of men and women over land (See Article 15).

Talk abounds of a global savings glut. In fact, the world economy suffers not from too much saving, but from too little investment.

Oil rich countries tend to save a lot. Countries with serious internal crises or conflicts tend to save little.

Apart from accounting for the global divergence in savings rates, tight credit constraints in China might explain the country s high, and rising, savings rate especially as the large rise in national savings is attributable mostly to household savings.

As a result, mortgage brokers maximize their income by generating larger volumes of mortgages, as do the banks that package these loans into mortgage backed securities (MBS s).

Since the saving of younger savers is now high and the dissaving of the older dissavers is low, the net saving rate is high.

As this change unfolds, the enormous willingness to save, and to tolerate high saving government policies, will fade.

In the US, the Term Asset Backed Securities Loan Facility (TALF) program and the Public Private Investment Program (PPIP) were in effect debt forgiveness schemes aimed at sub prime mortgage holders, but on too small a scale.

In Mexico, all mortgages carry fixed interest rates, unlike the infamous exploding ARMs that left US homeowners ruing their choice of adjustable rate mortgages when interest rates rose. Mexican mortgages are indexed to inflation, but the state mortgage agency links that index to the minimum wage and makes up the difference if mortgage interest adjustments for inflation outpace wage growth.

There is no way to predict what the saving rate will do next.