In each of these cases, the indicated policies would reduce global imbalances. Moreover, as with U.S. saving efforts, these actions would convey important economic benefits to the countries undertaking them even if current account balances were not an issue. What implications would a gradual rebalancing have for long-term real interest rates?
The logic of the global saving glut suggests that, as the glut dissipates over the next few decades and thereby reduces the net supply of financial capital from emerging-market countries, real interest rates should rise – a tendency that seems likely to be only partly offset by increased saving in the industrial countries.