The saving issue is especially critical for the US. America’s net domestic saving rate of just 2.2% of national income in the second quarter of 2019 is far short of the 6.3% average in the final three decades of the twentieth century. Boosting saving – precisely the opposite of what the US is doing in light of the ominous trajectory of its budget deficit – would be the most effective means by far to reduce America’s multilateral trade imbalance with China and 101 other countries. Doing so would also take the misdirected focus off a bilateral assessment of the dollar in a multilateral world.
A macro perspective is always tough for politicians. That is especially true today in the US, because it doesn’t fit neatly with xenophobic bilateral fixations, like China bashing. With new signs of Chinese resistance now surfacing, the phase one accord may never see the light of day. But if it does, it will hurt more than it helps in addressing one of the world’s toughest current economic problems.
Stephen S. Roach, former chairman of Morgan Stanley Asia and the firm's chief economist, is a senior fellow at Yale University's Jackson Institute of Global Affairs and a senior lecturer at Yale's School of Management. He is the author of "Unbalanced: The Codependency of America and China."