The thoughtful and hard-working John Aziz on Twitter:
John B. Taylor: "There is little evidence of a savings glut" http://t.co/tquaxSCfbs
Er, what? http://t.co/hv7bP40M1x
Indeed. I cannot follow it either.
John Aziz provides some context and explanation
John Aziz (April 30, 2013): A Visual Representation of the Zero Bound:
This graph shows savings at depository institutions as a percentage of GDP against the Federal Funds Rate. The actual cause of the desire to save rather than consume or invest is uncertain... demographic trend... psychological trend... shortage of “safe” assets... anticipation of deflation.... But whatever it is, we know that there is an extraordinary savings glut. There have been a lot of assertions that interest rates at present are unnaturally or artificially low. Well, what can we expect in the context of such a glut?... Theoretically, lower[ing] interest rates ceteris paribus should inhibit the desire to save, by lowering the reward for doing so. But interest rates cannot fall below zero, at least not within our current monetary system.... Even tripling the monetary base — an act that Bernanke at least believes stimulates an interest rate cut at the zero bound — has not discouraged the saving of greater and greater levels of the national income.... Investors are not finding better investment opportunities for their savings and the structure of production does not appear to be adjusting very fast to open up new opportunities for all of that idle cash.