

Paul Krugman: Revenge of the Glut - browngeek
http://www.nytimes.com/2009/03/02/opinion/02krugman.html?_r=1

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owinebarger
I don't think Krugman's conclusion that a savings glut is the problem is
explicit enough. It's that so much of the savings was lent for consumption
expenses, not investment in capital. This effectively localized the
consumption in a relatively small population, which couldn't really consume as
much as they were allowed to leverage, leading to inflation in pricing of the
goods they were consuming (houses in this case). If the same savings had been
consumed locally rather than given for consumption elsewhere, the total
consumption would have been spread out enough to avoid the inflationary
effects that blew up the bubble.

