Excessive Savings Will Eventually Constrain Global Economic Growth.

The so-called liquidity trap is a concept put forward by economist Keynes, which means that monetary policy can no longer stimulate the economy. When it comes to lowering interest rates or increasing the supply of money, it will not help, and funds will never be willing to invest.

This is not a new concept. Many countries have encountered this thorny issue.

From 1955 to 2000, the US $1.7 debt could bring an average GDP growth of US $1, but by 2000, the ratio of debt to GDP was deteriorating. Now we want to get us $1 of GDP growth and we need to invest almost $3.3.

China is also not optimistic.

Earlier, Sophie Jiang, a Nomura analyst, showed that China's liquidity efficiency has dropped sharply to a record low level from the perspective of the economic output created by every additional unit of currency, and the largest decline since early 2009.

According to Reuters, in terms of rolling annual data, the growth of GDP in China now needs 1 yuan, which needs more than 5 yuan of new credit, even higher than the level in 2009.

But the emergence of this phenomenon is more worrying and vigilant, especially in the majority of people who still think that saving is a good habit.

It's hard for you to convince the public at this time why this is actually a disaster for the global economy.

FT quoted a report from Citigroup to make some meaningful conclusions on this issue:

Long-term

At present, the low position is constantly being refreshed. But from a longer time span, it is a continuation of the trend that lasted for nearly 40 years, during which debt is accelerating.

But the problem is that debt is not invested in new investment, but in large scale.

The outcome of the game is the recession, which stimulates policy makers to constantly cut down real interest rates, thereby encouraging leverage, which in turn drives ahead of consumption or investment, taking into account the continuous depletion of interest rate downwards, which creates new problems.

This view is somewhat similar to the theory of long-term economic stagnation.

We infer that even though global interest rates are low, the lower natural rate means that interest rates may be more frustrating than originally expected.

The core issue is that if the savings fund is still searching for stock assets or consumption, rather than investment or expansion of production capacity, then the big cake of the economy will shrink or stagnate sooner or later.

Is it possible to become a global phenomenon? Citigroup's answer is YES.

In their view, liquidity traps (signs of long-term economic stagnation) are exported out through four channels:

1, in a low interest rate environment.

It can conduct long-term economic stagnation and economic recession.

2, we must adopt a beggar thy neighbour policy to improve our current account surplus.

3, reserve currencies will bear a disproportionate global liquidity trap because of the scarcity of secure assets.

4, large-scale fiscal expansion can eliminate long-term economic stagnation.

In addition, the phenomenon of excess euro is noteworthy.

Citigroup pointed out that in 2015, the contribution of the euro area to excess was equivalent to 3.2% of GDP, Japan was 3.3% and China was 3%.