Martin Wolf has a really nice column here. For those of you who can’t access the article, the bottom line is that German and Asian savers have (via their banks) invested their savings in an exceptionally foolish manner — that is, by lending to the likes of us, to finance our excessive consumption habits. There is a clear possibility that they are, sooner or later, going to lose a lot of money as a result.
This brings to mind Keynes’ famous line that
“If the Grand Trunk Railway of Canada fails its shareholders by reason of legal restriction of the rates chargeable or for any other cause, we have nothing. If the underground system of London fails its shareholders, Londoners still have their underground system.”
At least 19th century Britain was investing in overseas railways, rather than in overseas housing bubbles!
One wonders whether the threat of ‘restructuring’ will eventually prompt the ants of Germany and Asia to start investing more of their savings in domestic investment projects, which might provide them with the foundations of sustainable growth.