Morning Must-Read: Barry Eichengreen: It’s Not a Savings Glut, It’s a Tolerance for Holding Risky Investment Shortfall

Barry Eichengreen: It’s Not a Savings Glut, It’s a Tolerance for Holding Risky Investment Shortfall: “The data show little evidence of a savings glut….

It is plausible that the wealthy consume smaller shares of their income…. But to affect global interest rates, these trends have to translate into increased global savings…. A second explanation for low interest rates is a dearth of attractive investment projects. But this does not appear to be the diagnosis of stock markets…. Capital expenditure has been insufficient to prevent rates from trending down for more than three decades…. If the disorder has multiple causes, then there should be multiple treatments… tax incentives for firms to hire the long-term unemployed; more public spending on infrastructure, education, and research to compensate for the shortfall in private capital spending; and still higher capital requirements for banks and strengthened regulation of nonbank financial institutions…. Finally, central banks should set a higher inflation target…