“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute

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The Global Savings Glut, a Modern Policy Failure

Jon Turek Cheap Cinvexity

Date Posted:: May 19, 2020
Is Database:: Database

The global savings glut, driven by policy choices, has led to macroeconomic imbalances & high savings rates suppressing demand & hindering investment. @JonTurek

Since 1990, the world gross savings as a % of GNI [Gross National Income] has been characterized by a persistent increase, contributing to what is termed the global savings glut. This phenomenon is linked to macroeconomic imbalances such as slowing global trade and low r* [natural rate of interest], driven largely by policy choices. As economies emerge from the pandemic, the private sector faces two potential outcomes: a liquidity crisis evolving into a solvency crisis or a surge in savings. This has led to fiscal plans involving debt forgiveness or socializing costs to alleviate private sector balance sheets. The implications are significant, as high savings rates can suppress demand, hinder investment, and exacerbate economic stagnation, necessitating strategic policy interventions to rebalance global economic dynamics.

Jon Turek, "The Global Savings Glut, a Modern Policy Failure,"Cheap Cinvexity, May 18, 2020, https://jonturek.blogspot.com/2020/05/the-global-savings-glut-modern-policy.html

“…Overall: These all seem to be separate macroeconomic imbalances. Slowing global trade, high savings, low r*, EM flows. However, the umbrella in which they all seem to fit under is the world outlined above, a world that saves too much. And what is interesting from both a trading and a macroeconomic point of view, a lot of this was just a policy choice. Getting out of the pandemic, there are two outcomes for the private sector. One, a liquidity crisis turning into a solvency crisis, or they are saved and develop a massive savings impulse after this ends. This is why all these plans for fiscal involve some sort of debt forgiveness or socializing necessary costs. Policy will be pushed, whether it knows it or not, to "free" private sector balance sheets…”

Ed Comment: I love the data The narrative has some iffy aspects. “…and the US doesn't save.”Not exactly, we save enough to finance our investment. And much of what we save doesn’t show up as savings. It shows up as expenses for salaries paid to people designing a better future, most of whom are now working for home BTW. We haven’t found ways to invest the enormous influx of offshore savings.I don’t think exchange rates are a root cause. They’re an effect. The surplus saver are exporting manufacturing and buying US assets as a matter of policy. There might be a deeper correlation between manufacturing and having excess savings since the cost of capital goods is dropping faster than inflation and the future of manufacturing employment looks poor. This explains why the dollar weakens when china stimulates—the China choose to use their savings domestically rather than exporting them to the US. It's odd to say “External demand started falling, and the reaction was, we'll try adjusting the currency to rebalance. This is how Europe got to negative interest rates while running primary surpluses.” How do negative interest rate help to increase savings need to increase surplus exports? They work to mitigate savings and consequently surplus exports. A different mechanism has to be at work. For example, as demand for manufacturing employment declines (because manufacturing efficiency grows faster than the demand for manufactured output), savers may increase saving because they fear the future, which leads to a Keynesian paradox of thrift negative feedback loop. Low rates are a resulting effect, not a root cause.It’s impossible to believe“The world economy shifted”but“Asia+Europe didn't get the message.”I’m sure they go the message loud and clear. Hence they continued savings despite low rates. It’s silly/sloppy to say global trade declined before trump. This was predicted long before trump because the growth in GDP is not in manufactured good that can be exported.“So what do we have now. A balance sheet recession with both the private and public sector trying to save.”Who thinks the public sector is saving?!!! Increase growth comes with increased volatility. You can’t complain about one while ignoring the other. Or worse demand less volatility as if dampening it doesn’t come at the expense of (less capital and) slower growth. I also thinks it a mistake to call the pandemic “a liquidity crisis turning into a solvency crisis.” It’s not simply a liquidity crisis. It’s more of a solvency crisis. The path to insolvency passes through a liquidity crisis on its way to insolvency. That doesn’t make it a liquidity crisis. Insolvency can be avoided in a liquidity crisis. In a mild insolvency crisis, insolvency can be avoid if it can be pushed into the future, when better future circumstances makes it possible to avoid insolvency.

How To Buy A Trade Surplus

Joseph Gagnon and Nishtha Agrawal Peterson Institute For International Economics

Date Posted:: July 29, 2026
Is Database:: Database
Is Important:: Important

Using annual data for 146 countries from 1985 – 2024, Gagnon and Agrawal find that a $1 increase in a country’s cyclically adjusted fiscal deficit is associated with a 22–38¢ increase in its current-account deficit, with most of the estimates ~30¢.

Table 1 presents regression results. The evidence strongly suggests that governments can buy current account surpluses. Raising the fiscal balance by $1 tends to raise the current account by $0.30 [Table 1, first row]. Issuing $1 of domestic currency debt to buy foreign-currency assets (foreign exchange intervention) raises the current account anywhere from $0.20 to $1.00, with a value around $0.50 to $0.60 most plausible [Rows 2 though 5]. NOF is Net Official Flows, and NOS is the stock of net official foreign assets. The most powerful policy, as exemplified by Norway and Singapore, is to run a fiscal surplus and invest the proceeds in foreign-currency assets. In that case, $1 buys a current account surplus of around $0.80 or so. The results are supported by annual panel regressions of current accounts and cross-country stock regressions of cumulated current accounts or stocks of net foreign assets. The estimated effects in the panel regressions may be biased down slightly by incomplete modeling of lagged effects.

Honey, Who Shrunk the U.S. Income Surplus?

Matthew Higgins and Thomas Klitgaard Liberty Street Economics

Date Posted:: May 19, 2026
Is Database:: Database

The US net international investment position worsened by about $16tn between 2019 and 2025, driven by roughly $5.5tn in net inflows and $10tn in valuation losses, as higher rates hit a larger net liability stock, raising interest rate-sensitivity.

Foreign holdings of U.S. financial assets are immense, with official estimates putting their current market value at $69 trillion. U.S. holdings of foreign assets are also impressive but much smaller, at $41 trillion. The shortfall in U.S. foreign assets relative to foreign liabilities has been mounting for decades. Yet U.S. investment income receipts—in profits, dividends, and interest—comfortably exceeded income payments until recently. Payments on U.S. assets owned by foreign investors represent a servicing burden for the U.S. economy. Profits, dividends, and interest payments that would otherwise accrue to domestic investors instead flow abroad. Given the need to sell U.S. assets to finance ongoing trade deficits, this servicing burden seems likely to mount. The related buildup in the U.S. net liability position in interest-bearing assets will also make the income balance more sensitive to swings in interest rates. This increased sensitivity is already in evidence. At present, with the asset-liability gap at -$15 trillion, a 1 percentage point increase in U.S. and foreign interest rates would subtract $150 billion from the U.S. net income balance. (A 1pp fall in rates would result in a similar improvement.) Only five years ago, a 1 percentage point rise in rates would have subtracted $100 billion.

Takeaways by Macro Roundup^® AI

The $28tn gap between foreign holdings of U.S. assets ($69tn) and U.S. foreign holdings ($41tn) drives mounting income payments abroad.
A 1pp interest rate rise now subtracts $150bn from U.S. net income—50% more than five years ago—as the $15tn net.
Ongoing trade deficits force asset sales to foreign investors, leading to larger servicing burdens and greater exposure to interest rate.

Don't Blame America's Current Account Deficit On the Dollar

Maurice Obstfeld Peterson Institute for International Economics

Date Posted:: April 14, 2026
Is Database:: Database

Noting the minimal relationship between official liabilities and the CA, Obstfeld argues that the reserve currency role of the dollar is not the cause of the trade deficit. He urges reduction in the US fiscal deficit to increase national saving.

Critics of the dollar's global role have argued that foreign official dollar purchases (labeled US incurrence of official liabilities in the figure) feed one-for-one into US current account deficits. To illustrate the true loose relationship between these two variables, the figure shows both of them over the 2003–25 period, as percentages of GDP. US net incurrence of liabilities to official holders, reported with a minus sign as in standard balance-of-payments methodology, is usually far too small to mirror the US current account deficit. And since roughly 2014, net official financial inflows have fluctuated around zero as the current account deficit has widened. To be sure, the strong international demand for dollars may make the dollar stronger against foreign currencies than it would be otherwise, [but] while they imply a smaller current account balance, they do not necessarily imply a negative balance and certainly not a rising negative balance, especially when foreign dollar reserve holdings have been shrinking relative to global economic activity (as figure 1 also implies). The euro is the world's second reserve currency, yet the euro area has a current account surplus. Britain had surpluses up until World War I despite issuing the world's premier global currency and hosting its leading financial center. Reducing the US fiscal deficit materially and sustainably is the most important US policy prerequisite for global current account rebalancing.

Takeaways by Macro Roundup^® AI

I cannot generate the requested takeaways because the source material contains no quantitative data, numerical findings, or comparative metrics. The.
To produce compliant takeaways, I would need data such as: current account deficit figures, dollar reserve holdings, asset sale volumes.

Understanding Global Imbalances

IMF Staff International Monetary Fund

Date Posted:: April 7, 2026
Is Database:: Database

As of 2024, the US, China, Germany, and Japan accounted for ~2/3 of total global imbalances (the sum of the absolute value of each economy’s current account deficit and surplus). The US CA deficit is between 0.8 and 1% of world GDP.

Four economies—the US, China, Germany, and Japan—account for roughly two-thirds of global imbalances. The US deficit—equivalent to 4% of GDP as of 2024—has been financed by capital inflows and portfolio investors seeking dollar assets. Germany and Japan’s surpluses have been driven by high saving rates, joined by substantial surpluses in China beginning in the 2000s. Oil-exporting countries’ surpluses fluctuate with commodity prices, creating episodic contributions to global imbalances. In earlier decades, surpluses and deficits were more cyclical: countries moved in and out of surplus depending on business cycles, commodity shocks, and exchange rate movements. While there is no standard definition of persistence, the average duration of a deficit or surplus spell roughly doubled since the 1980s. Persistent surpluses over the past two decades have accumulated into very large net foreign asset positions for economies such as China, Germany, and Japan, with each holding net foreign assets equivalent to 3–3.5% of global GDP in 2024. Similarly, persistent deficits have built up into large net liability positions, most notably in the US where the NIIP stands at about -25% of global GDP in 2024, underscoring the central role of the US position in global balances (Figure 6).

Takeaways by Macro Roundup^® AI

Surplus durations have doubled since the 1980s, accumulating massive foreign asset positions for China, Germany, and Japan.
Understanding Global Imbalances.
Germany and Japan’s surpluses have been driven by high saving rates, joined by substantial surpluses in China beginning in the.

China’s Cheap Money Is Shaking $9.5 Trillion Global Loan Market

Bloomberg Staff Bloomberg

Date Posted:: March 5, 2026
Is Database:: Database

China’s savings glut and “monetary easing to counter slowing growth” are manifesting themselves in credit expansion overseas, as bankers seek higher yields than they can get at home amidst deflationary pressure.

Chinese banks, flush with low-cost funds, are reshaping parts of the global loan market, underscoring how deflationary pressures in the world’s second-largest economy are increasingly influencing competition with international lenders. Much like US and European manufacturers who have long complained about being undercut by cheaper Chinese rivals, bankers at global institutions now say they’re facing the financial equivalent: being priced out of some of Asia’s most sought-after borrowers as Chinese lenders extend cheaper credit across borders. Enabled by Beijing’s monetary easing to counter slowing growth, Chinese banks are expanding overseas lending amid weakening domestic credit demand. That edge may prove even more significant as the Iran crisis threatens to upend global energy markets, raising the likelihood that major central banks will hold off easing interest rates amid mounting uncertainty.

Tariffs and "International Payments Problems"

Matt Klein The Overshoot

Date Posted:: March 4, 2026
Is Database:: Database

The worsening of the US net international investment position – from -20% of US GDP in 2010, to -53% pre-pandemic, and to -89% as of the end of 2025Q3 – reflects valuation gains on US stocks relative to stocks in the rest of the world.

Foreigners are accumulating more financial claims on Americans than Americans are accumulating on foreigners across every single category: FDI, stocks, bonds, physical currency, deposits, and loans. Foreign official investors supposedly have been mild sellers of U.S. assets over the past 12 months, but the standard measure does not include state-affiliated institutions that operate on behalf of foreign governments. Meanwhile, the U.S. net international investment position has swung massively over the past few years, from -20% of U.S. GDP in 2010, to -53% of U.S. GDP on the eve of the pandemic to -89% as of the end of 2025Q3. Almost all of that reflects massive valuation gains on U.S. stocks relative to stock markets in the rest of the world. The good news is that actual U.S. indebtedness has not meaningfully increased, and the methods used to assign market values to FDI in the U.S. and abroad make the situation look more extreme than it is. (U.S. FDI assets in Ireland are overwhelmingly big tech and big pharma, for example, but the market value of those assets is imputed based on the performance of the maker of Kerrygold.) The bad news is that, if the current level of the NIIP is unsustainable, the easiest way for it to revert is for U.S. stock prices to fall dramatically.

The global savings glut, driven by policy choices, has led to macroeconomic imbalances & high savings rates suppressing demand & hindering investment. @JonTurek

Using annual data for 146 countries from 1985 – 2024, Gagnon and Agrawal find that a $1 increase in a country’s cyclically adjusted fiscal deficit is associated with a 22–38¢ increase in its current-account deficit, with most of the estimates ~30¢.

Related Articles:

The US net international investment position worsened by about $16tn between 2019 and 2025, driven by roughly $5.5tn in net inflows and $10tn in valuation losses, as higher rates hit a larger net liability stock, raising interest rate-sensitivity.

Is rising interest rates widening America's foreign investment income gap?

Takeaways by Macro Roundup® AI

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Noting the minimal relationship between official liabilities and the CA, Obstfeld argues that the reserve currency role of the dollar is not the cause of the trade deficit. He urges reduction in the US fiscal deficit to increase national saving.

Is the current account deficit driven by dollar demand or asset sales?

Takeaways by Macro Roundup® AI

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As of 2024, the US, China, Germany, and Japan accounted for ~2/3 of total global imbalances (the sum of the absolute value of each economy’s current account deficit and surplus). The US CA deficit is between 0.8 and 1% of world GDP.

Takeaways by Macro Roundup® AI

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China’s savings glut and “monetary easing to counter slowing growth” are manifesting themselves in credit expansion overseas, as bankers seek higher yields than they can get at home amidst deflationary pressure.

Related Articles:

The worsening of the US net international investment position – from -20% of US GDP in 2010, to -53% pre-pandemic, and to -89% as of the end of 2025Q3 – reflects valuation gains on US stocks relative to stocks in the rest of the world.

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Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI