The global macro outlook is driven by the interaction among three gluts: the savings glut, the oil glut and the money glut.
While the global savings glut is likely the main secular force behind the global environment of low growth, low inflation and low interest rates, both the oil and the money glut should help lift demand growth, inflation and thus interest rates from their current depressed levels over the cyclical horizon.
Let’s look at each of the three gluts in turn.
The term “global savings glut” is a simplification, of course. Ben Bernanke coined the term a decade ago to describe a situation where an excess of global desired saving over global desired investment depresses low long-term interest rates.
Ten years later, it is fair to say that the ex-ante savings/investment imbalance is even greater and the global equilibrium real interest rate even lower.