Paulson Says High Savings Rates Led to Credit Bubble

The China Daily says:

With the global economic downturn taking its toll on China's households and businesses, Chinese economists have moved to defend the nation's savings rate against charges that it has aggravated the crisis.

The Financial Times on Jan 2 reported US Treasury Secretary Hank Paulson as saying, "In the years leading up to the crisis, super-abundant savings from fast-growing emerging nations such as China and oil exporters ... put downward pressure on yields and risk spread everywhere."

Paulson said this laid the seeds of a global credit bubble, the British newspaper reported.

His argument was largely endorsed by Federal Reserve chairman Ben Bernanke, according to the Financial Times.

However, Zhang Yuyan, an international economics expert from the Chinese Academy of Social Sciences (CASS), said a major cause of the crisis was the unchecked business operations of US financials in which the banks repackaged mortgages, including sub-prime, into investment products and sell to financial institutions worldwide.

To read more:

http://www.chinadaily.com.cn/bizchina/2009-01/07/content_7375620.htm