Debt per se is not the issue, but debt levels which are excessive relative to the underlying strength of the real economy. Understanding the channels through which the build-up of ﬁnancial stability risks affect the real economy and may cause resource misallocation is important.
In recent years, this matter has received a lot of attentions. The IMF (International Monetary Fund) has organized a series of discussions, and the focus has shifted from balance of payments surplus to savings gluts. It is comforting to see that the household savings rate has gone up to almost 7 percent in the U.S. as recently as this last May.