In the financial system there is what I call the ‘waterbed effect’. Pressing down on one end of the financial system will cause risks to pop up elsewhere. And, indeed, since 2008 non-bank financial intermediation, or NBFI, has grown much faster than bank intermediation. It now accounts for about half of all financial assets worldwide.
Although it is difficult to predict with any precision the course of asset values, or productivity growth, or federal entitlement programs, or even interest rates, all told I would not expect the personal saving rate to return in the near term to the peaks seen twenty years ago, and I would be surprised even by a return anytime soon to the average rate that prevailed between the 1950s and the 1980s.