Commentary: "High savings helped inflate U.S. credit bubble" an untenable statement

Special Report:Global Financial

Crisis

BEIJING, Jan. 7 (Chinese media) -- A strange view has

emerged recently from some U.S. government and economic circles, which says high

savings in emerging markets such as China and oil exporting countries sowed the

seeds of a global credit bubble, whose bursting led to the current global

financial crisis.

The statement is both irresponsible and untenable.

The advocates of this view claim that different

countries have different saving and investment tendencies, resulting in

imbalances in the world economy.

They also say the emerging markets have exerted

downward pressure on investment yields in recent years at a time of low

inflation and booming trade and capital flows, driving investors in developed

economies to turn to riskier investments.

First, the statement has an apparent logical

shortcoming. High savings in emerging markets do not mean consumers and

investors in developed economies can borrow money from them without misgivings.

More importantly, the high savings rate in emerging

markets is not a reason for developed countries to loosen financial regulation

and look on arms folded as financial institutions develop new derivatives and

let financial bubbles balloon.

For the Chinese, the habit of saving originates from

their long-time culture and tradition and the habit is also seen as part of

their cherished virtues of diligence and thrift.

Furthermore, previous outbreaks of world and regional

financial crises have proven that Chinese savings have no causal relationship

with the crisis.

The reasons for the current financial crisis lie in

excessive consumption, high indebtedness, improper macroeconomic policies and

lack of financial regulation, analysts say.

The United States should have recognized that

borrowing from abroad for consumption and deficit spending at home was not a

formula for economic success, the New York Times cited economists as saying.

Although the problem is widely recognized, Americans

are likely to become more addicted than ever to borrowing foreign money to

finance record government spending to revive the broken economy, they warned.

Some experts have also referred to the lack of ethics

in the financial system as they tried to find out the causes for the crisis.

"We don't just need a financial bailout; we need an

ethical bailout," wrote columnist and Pulitzer Prize winner Thomas Friedman in

the New York Times.

"We need to re-establish the core balance between our

markets, ethics and regulations. I don't want to kill the animal spirits that

necessarily drive capitalism -- but I don't want to be eaten by them either," he

said.

In a word, politicians and economists in the United

States should stop trying to find reasons for the crisis outside U.S. borders.

Some analysts say that the comment about high savings triggering the financial

crisis is just an excuse for all the real reasons for the problem.

The urgent task for the United States, the world's

biggest and most important economy, is not to shirk its responsibilities, but

find solutions for the crisis and realize balanced economic growth.

To achieve these goals, it should accelerate domestic

adjustment, reasonably enhance the level of saving, reduce trade and financial

deficit and properly deal with the relationship between risks and profits as

well as regulation and innovation.

In recent years, the International Monetary Fund has

issued warnings on the imbalance of the global economy and the Group of Seven

industrialized nations have often stated they are concerned over the imbalance,

but the statements were not followed by any action.

The financial crisis has not yet hit its bottom and

its impacts on the real economy are deepening. The international community needs

to act together to curb the spread of the crisis and major economies should

shoulder their responsibility by adopting proper economic policies and

stabilizing their own and international financial markets instead of looking for

someone outside to blame.

U.S. blame game cannot change facts of financial crisis