Christian Noyer: Public and private debt – imbalances of global savings Introductory speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at Session 3 “Public and private debt – imbalances of global savings”, Aix-en-Provence Economic Forum, Aix-en-Provence, 6 July 2012. *  *  *  In introduction to this session, I would like to make seven remarks. My first remark is inspired by the very title of this session. In advanced countries, the average public debt to GNP ratio is 100%. In emerging countries, the figure is 30%. This is a very wide gap, and it represents one of the global economy’s largest imbalances. And one of the least mentioned. It also represents a complete reversal of the situation compared with just over twenty years ago. At that time, I remember well, I was chairman of the Paris Club, and emerging countries came to ask for the rescheduling of their debt. Second remark, global demand is still fairly concentrated on the advanced countries. Not only is their debt higher, but their savings (as a ratio of GNP) are lower. The G7 countries alone still account for 56% of global consumption. The problem is clear. How can we hope to raise our level of consumption if we need to reduce our level of debt and increase our savings?
Debt markets are profoundly disrupted and international movements of capital have been highly volatile over the last two years. Fifth remark. The intervention capacities of central banks are of course limited. They can remedy temporary market disruptions and situations of illiquidity caused by uncertainty. Recently they have intervened to an unprecedented extent, as reflected in their balance sheets. But they cannot permanently substitute financial markets and banks when financial intermediation malfunctions. Likewise, low or zero interest rates can contribute to stabilising  BIS central bankers’ speeches  1  the economy in periods of crisis, but if maintained over a protracted period, they can create distortions, encourage the formation of bubbles and create risk for long-term investors. Indeed, on this topic, I would like to make one observation. The question of monetary financing of deficits was raised by David Thesmar. Such financing cannot in any way resolve the problem of the dislocation between savings and investment, either at the national level or at the global level. Some central banks have developed large-scale public debt acquisition programmes. They have done so for reasons relating to immediate macroeconomic stabilisation... to go beyond the zero-interest rate limit. The Eurosystem as well intervened on a much smaller scale when malfunctioning debt markets prevented the effective transmission of monetary policy impulses. There is not a single central bank that is seriously considering the monetisation of deficits with the more or less declared intention of reducing the weight of debt via inflation.