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When I was browsing the internet last night, I read a couple articles on the Global Saving Glut. And many has ascribed it to be a cause of US financial crsis. My question is how so? The articles argue that huge saving from abroad flooded the US with cash and drives down the interest rate and in turn encourage riskier investment. However, we know that the US dollars abroad are payments from the US. In other words, the dollars foreigners lend to the US comes from the US. So even if there is not a saving glut, US will still have the same amount of cash availiable because then US does not have to pay for the current account deficit. So it feels to me that the availiable cash did not change. Any suggestions please?

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  • $\begingroup$ In case you do not get a response here, Wikipedia has a less technical explanation. $\endgroup$ – london Dec 16 '15 at 17:54
  • $\begingroup$ Can you please give me the link? Thanks $\endgroup$ – Kun Dec 16 '15 at 17:55
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    $\begingroup$ Just google "Global Savings Glut", you get tons of threads, the first of them is from wikipedia. $\endgroup$ – london Dec 16 '15 at 17:57

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