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The Saving Glut of the Rich and the Rise in Household Debt

Atif Mian, Ludwig Straub and Amir Sufi Harvard University

Date Posted:: January 9, 2020
Is Database:: Database

The “saving glut of the rich” in the US has mirrored the global saving glut but without a corresponding rise in investment, linked to “dis-saving” of the bottom 90%.

Since 1980, rising income inequality in the U.S. has led to a significant increase in savings by the top 1%, termed the "saving glut of the rich," which mirrors the global saving glut but without a corresponding rise in investment. This phenomenon has been linked to a substantial dis-saving by the bottom 90%, whose saving rates fell significantly during this period. The net household debt position of the top 1% decreased by 20 percentage points of national income, reflecting their accumulation of household debt as a financial asset, while the bottom 90% saw their net household debt position increase by 40 percentage points. This indicates that rich Americans have increasingly financed the borrowing of non-rich Americans, with income growth at the top explaining 75% of the accumulation of household debt held as a financial asset. Post-Great Recession, the saving glut of the rich has also been financing government deficits more extensively.

Takeaways by Macro Roundup^® AI

The net household debt position of the top 1% of U.S. households fell by 20 percentage points of national income since 1980, while the bottom 90% saw theirs rise by 40 percentage points, as rich Americans increasingly financed the borrowing of non-rich Americans.
Rising U.S. income inequality since 1980 has produced a "saving glut of the rich," with the top 1% increasing savings without a corresponding rise in investment, mirroring the global saving glut, alongside falling saving rates among the bottom 90%.
Income growth at the top explains 75% of the accumulation of household debt held as a financial asset, and since the Great Recession the saving glut of the rich has financed government deficits more extensively.

Atif Mian, Ludwig Straub and Amir Sufi, "The Saving Glut of the Rich and the Rise in Household Debt," Harvard University, November 2019, https://scholar.harvard.edu/files/straub/files/mss_richsavingglut.pdf

"....Rising income inequality since 1980 in the United States has generated a large increase in saving by the top of the income distribution, which we call the saving glut of the rich. The saving glut of the rich has been on the same order of magnitude as the global saving glut, and it has not been associated with an increase in investment.An examination of thedistribution of income and wealth reveals that a large fraction of the rise in household borrowing by non-rich households has been ﬁnanced by rich households through this saving glut...From a national accounting perspective, the saving glut of the rich must have been absorbed by some other part of the economy...investment actually declined from 1980 to 2014, and government deﬁcits were stable until the Great Recession....the net foreign account moves in the opposite direction. The United States as a whole borrowed more from the rest of the world during this time period... This leaves only one remaining margin: the rest of the U.S. household sector must have reduced saving substantially. This is what the analysis ﬁnds. Saving by the bottom 90% of the income distribution fell signiﬁcantly over this time frame. The rise in saving of the top 1% was associated with a substantial dis-saving by the bottom 90%.... The results show that the rise in household debt owed as a liability was driven by the bottom 90% of the income distribution, where as the rise in house hold debt held as a ﬁnancial asset was driven by the top of the wealth distribution. This suggests that a better measure of house hold debt claims across the wealth distribution is net household debt owed, which is deﬁned as gross household debt owed minus household debt held as a ﬁnancial asset. Net household debt positions clarify that the post 1980 period was one in which rich Americans increasingly ﬁnanced the borrowing of non-rich Americans. The net household debt position of the top 1% fell by 20 percentage points of national income since 1980 which reﬂected their accumulation of house hold debt held as a ﬁnancial asset. In contrast, the net house hold debt position of the bottom 90%increased by 40 percentage points.... Analysis using variation across states in the rise in top income shares shows that income growth at the top of the income distribution can explain 75%of the accumulation of household debt held as a ﬁnancial asset by households in the United States. After the Great Recession, evidence suggests that the saving glut of the rich has been ﬁnancing government deﬁcits to a greater degree…”

new Mian/Sufi on the "savings glut of the rich" which they argue domestic rich savers (with a qualifier "may be") linked to the "dis-saving" of the bottom 90%.

Ed Comment:“I gave the paper a quick read. It's a valuable contribution. But it's a small piece of a larger macro picture. Of course as the income of the top1% grows relative to GDP, so too will their savings. The riskiness of the economy has grown significantly since the 1960s as well as our understanding of those risks. No surprise risk underwriters are carrying more low-risk assets. That said, I agree that's not the only reason. In the 60s, manufacturing was having an enormous positive impact of the economy -- see Gordon's book. There was little offshore competition, especially from $3 an hour labor. We thought the US was invincible. Growth reduces risk. Growth was largely driven by low risk expansions of existing capacities. Unlike Gordon's book on Intel in the 1990s, (Only the Paranoid Survive) which is all about competition, Alfred Sloan's landmark 1960s book on GM is about organization. Competition was barely on his radar. The rest of the world has grown more competitive. Growth has slowed. Risky innovation now largely drives growth on its own. So does the growth of risky intangible investments overlooked in the paper. Employees and entrepreneurs underwrite risk through options, equity, and startups. Undiversified risk of this sort is much riskier to hold. Government policy is more f-ed up. And over time, we recognize more of these risks. Statisticians barely considered fat tail risks in the 1960s. No surprise risk-underwriters increasing hold low-risk assets to offset the risks they are bearing. My guess is if you do something to discourage that, they will find other ways to dial back risk--better more cash than less innovation. Most policy is the mistaken analysis of a world too complex to analyze, which results in unintended consequences. Mutation, survival of the fittest, and gradual evolution is far more likely to produce more optimal and robust results. That's why I favor free markets over dangerous armchair second guessing. The latter is highly likely to be wrong. Mian and Sufi don't have their noses far enough off the paper to recognize the factors I raise here much less to have considered them fully. They are great data analysts but sloppy macroeconomists.”

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.

Takeaways by Macro Roundup^® AI

Regression results suggest that raising the fiscal balance by $1 tends to raise the current account by about $0.30.
Issuing $1 of domestic currency debt to buy foreign-currency assets is estimated to raise the current account by $0.20 to $1.00, with $0.50 to $0.60 most plausible.
Combining a fiscal surplus with investment of the proceeds in foreign-currency assets, as Norway and Singapore do, is estimated to buy a current account surplus of around $0.80 per $1.

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

Official estimates put the current market value of foreign holdings of U.S. financial assets at $69tn, against $41tn of U.S. holdings of foreign assets, a shortfall that has been mounting for decades.
With the U.S. asset-liability gap in interest-bearing assets at -$15tn, a 1 percentage point rise in U.S. and foreign interest rates would subtract $150bn from the U.S. net income balance, compared with $100bn five years ago.
U.S. investment income receipts in profits, dividends, and interest exceeded income payments until recently, and the servicing burden on foreign-owned U.S. assets seems likely to mount given the need to sell U.S. assets to finance ongoing trade deficits.

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

US net incurrence of liabilities to official foreign holders over 2003–25, measured as a share of GDP, is usually far too small to mirror the US current account deficit, contradicting claims that official dollar purchases feed one-for-one into it.
Since roughly 2014, US net official financial inflows have fluctuated around zero while the US current account deficit widened, and foreign dollar reserve holdings have been shrinking relative to global economic activity.
The euro area runs a current account surplus despite the euro's status as the world's second reserve currency, and Britain ran surpluses until World War I while issuing the premier global currency and hosting its leading financial center.

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

The US, China, Germany, and Japan together account for roughly two-thirds of global imbalances, with the US deficit equal to 4% of GDP in 2024, financed by capital inflows and portfolio investors seeking dollar assets.
The average duration of a deficit or surplus spell roughly doubled since the 1980s, when countries moved in and out of surplus with business cycles, commodity shocks, and exchange rate movements.
China, Germany, and Japan each held net foreign assets equivalent to 3–3.5% of global GDP in 2024, while the US net international investment position stood at about -25% of global GDP.

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.

Takeaways by Macro Roundup^® AI

Chinese banks, flush with low-cost funds from Beijing's monetary easing, are reshaping parts of the $9.5 trillion global loan market by extending cheaper credit across borders.
Bankers at global institutions say they are being priced out of some of Asia's most sought-after borrowers by Chinese lenders, a financial equivalent of the undercutting US and European manufacturers have long complained about.
Weakening domestic credit demand in China is accompanying an expansion of its banks' overseas lending, an edge that may prove more significant if the Iran crisis leads major central banks to hold off easing interest rates.

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.

Takeaways by Macro Roundup^® AI

The U.S. net international investment position swung from -20% of GDP in 2010 to -53% just before the pandemic and -89% as of 2025Q3, almost all reflecting valuation gains on U.S. stocks relative to foreign stock markets.
Foreigners are accumulating more financial claims on Americans than Americans are on foreigners in every category — FDI, stocks, bonds, physical currency, deposits, and loans — while actual U.S. indebtedness has not meaningfully increased.
Methods for assigning market values to foreign direct investment make the imbalance look more extreme than it is, since U.S. FDI assets in Ireland are overwhelmingly big tech and big pharma yet are valued using the performance of the maker of Kerrygold.

The “saving glut of the rich” in the US has mirrored the global saving glut but without a corresponding rise in investment, linked to “dis-saving” of the bottom 90%.

Does rising saving by the top 1% finance borrowing by everyone else?

Takeaways by Macro Roundup® AI

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¢.

Can governments buy current account surpluses with fiscal and currency policy?

Takeaways by Macro Roundup® AI

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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.

How does a growing net liability position affect U.S. investment income?

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.

Does the dollar's reserve role drive the US current account deficit?

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.

How persistent are global current account imbalances and which economies drive them?

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.

Are Chinese banks undercutting global rivals in cross-border lending?

Takeaways by Macro Roundup® AI

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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.

Does the deteriorating U.S. investment position reflect borrowing or stock valuations?

Takeaways by Macro Roundup® AI

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