09-25-2016, 02:43 AM
One of the biggest spots was the global imbalance of current accounts, according to HSBC Chief Economist Janet Henry. The imbalance from a world where some countries were hoarding and others were spending too freely led to malinvestment and ultimately bubbles, according to Henry. The worrying issue that faces the world now, Henry said in a note to clients, is that these imbalances are growing once again. "Just under a decade ago, the global savings glut was widely blamed for the misallocation of resources that led to bubbles, busts and ultimately the global financial crisis," wrote Henry. "The fact that global imbalances widened again in 2015 and that in dollar terms they will be close to record highs this year poses risks for both debtor and creditor countries."
Current account 'global imbalances' financial crisis growing again - Business Insider
These surpluses have built up to nearly historic levels for a few reasons, said Henry. Weak internal demand in countries with current-account surpluses means those countries' citizens are under-consuming and thus saving too much money. Additionally, the savings are being invested outside of the country. "Running persistent current account surpluses implies that these economies are constantly saving more than they are investing, preferring to invest those savings overseas," said Henry in the note. "In other words, they are building up a large net international investment position: something countries with aging populations (including Japan, Germany, China and South Korea) can argue is necessary to sustain living standards."
Current account 'global imbalances' financial crisis growing again - Business Insider