Growth requires an efficient use of savings, but this is seldom the case

For growth in the global economy to be strong growth in the long term, savings must be used efficiently such that useful investments are financed. In many cases, however, savings are used inefficiently: In the United States and Europe prior to 2008 and again today, as well as in Japan today, savings finance growth in real estate prices; In China, a large share of savings finances inefficient investments in construction; Germany’s and the Netherlands’ excess savings finance the United States’ external and fiscal deficits instead of financing productive investments in Europe; In the euro zone excluding Germany and the Netherlands, a large share of savings finances higher current fiscal deficits and not efficient public investments. It would take a more efficient use of global savings to lift global potential growth.