As well, the absence of market-based mechanisms within these economies – including the lack of a flexible exchange rate – impedes domestic economic adjustment. In addition to this, we have seen many oil-exporting countries record large trade surpluses, as the price of crude oil has risen. So, many Asian and oil-exporting countries are experiencing high levels of desired savings relative to desired investment.
The U.S. economy is in the reverse situation. Over the past few years, the United States has become a large net borrower, as government deficits rose and household savings fell. As a result, we have seen lower desired savings relative to desired investment in the United States.