Savings Glut
Jude Wanniski
July 21, 2005


From: Jude Wanniski  <        
To:      Ben.S.Bernanke@ * * * * *.GOV                                               
Subject: Fwd: Re: Savings glut
5:44 pm, 7/21/2005

I thought you should see this.  Greenspan was plain awful in his testimony this week. But members of Congress don't know any better, so they slobber all over him. He again said we don't need a gold standard, because he has demonstrated since he came to the Fed in 1987 that the central bank could "replicate" the gold standard. Take a look at the dollar/gold price from 1987 until today and you will see how terrific he has been in replicating the gold standard.  I can't wait for him to leave, Ben, because he now has so much invested in his Fed legacy as a Maestro that he could never admit he screwed up almost all along the way.


Date: Thu, 21 Jul 2005 18:25:44 -0400
To: "XXX, Scott F." <* * * * @****.com>
From: Jude Wanniski <>
Subject: Re: Savings glut

Scott....    When eggheads like Gross and Greenspan and Bernanke can't explain what the heck is going on, they make stuff up. The Bernanke "savings glut" is ridiculous, and I'd hope one of these days Bernanke would move on, saying it may not have been a glut after all, but at the moment the people at the top of the "intellectual" pyramid on macro have nothing better.  Conundrums abound.  For Greenspan to argue there is a savings glut is a denial of his lifelong advocacy of the efficiency of markets and an embrace of cash-slow Keynesianism.  The reasoning is circular. People out there (in Asia) have more money than they know what to do with, so they buy US Treasuries paying low rates of interest, and this is why US Treasuries pay low rates of interest. BTW, David Malpass and Bear Stearns are also riding this savings-glut bandwagon. I wonder if Milton would sign on if asked.


At 06:01 PM 7/21/2005, you wrote:

Jude, what do you make of the current fad theory (now endorsed by Bill Gross, Alan Greenspan and Ben Bernanke) which says that U.S. yields are low because there is too much saving and not enough consumption in the world? It makes no sense to me, and I remember you writing something many years ago about a related subject (e.g., savings glut, underconsumption).

Scott XXXX


E-mail sent through the Internet is not secure. * * * * * therefore recommends that you do not send any confidential or sensitive information to us via electronic mail, including social security numbers, account numbers, or personal identification numbers. Delivery, and or timely delivery of Internet mail is not guaranteed. Western Asset therefore recommends that you do not send time sensitive or action-oriented messages to us via electronic mail.