[14] David Wessell in a Wall Street Journal article observed that, "[c]ompanies, which normally borrow other folks’ savings in order to invest, have turned thrifty.
[17] In their July 2012 report Standard & Poor's described the "fragile equilibrium that currently exists in the global corporate credit landscape".
[15] By January 2013, NFCS firms in Europe had over 1 trillion euros of cash on their balance sheets, a record high in nominal terms.
A. Hobson and John Maynard Keynes considered the effect of an imbalance between savings and investment on the economy, which for them was caused by an overtly unequal distribution of income and wealth [22] Their underlying thesis is that a principal cause of depression is formed by the inability of capitalists to find sufficient investment opportunities to offset the increasing levels of saving generated by economic growth.
The underlying reason is that as money is saved, it is extracted from the economic system or flow, which reduces consumption over time when these funds are not invested again.
The borrowed funds could then be spent on socially useful projects (which should not increase the economy's production capacity or hinder future investment opportunities).
[26] When the equity market bubble burst in the early 2000s, companies in many industrial countries reduced borrowing funds to finance their capital expenditures.
[5][6][7] In March 2013 Moody's Investors Service published their report entitled Cash Pile Grows 10% to $1.45 Trillion; Overseas Holdings Continue to Expand in their Global Credit Research series, in which they examined companies they rate in the US non-financial corporate sector (NFCS).
Kliesen also argued that another reason for cash hoarding in the U.S. is the "relatively high U.S. corporate tax rate on income generated from foreign operations and subsidiaries".
They concluded that the "monopoly power of Japanese banks" persuaded non-financial corporations to hold larger cash balances.
[34] In 2005 J.P. Morgan Chase & Co. observed that the increase in excess saving in the corporate sector contributed to the "relatively low level of global long-term interest rates at a time of a ballooning U.S. current account deficit".
[34] NFCS firms began deleveraging after the financial crisis as they found that their assets were "worth less than they imagined and discovered that continuous access to debt markets was not guaranteed".
[34] In 2013 Gareth Williams, Director, Sector Economist at Standard & Poor's argued that a "large and growing share of European corporate capex was directed to emerging markets" outside of Europe, "up 42% from January 2012 and up from 28% from 2007".
[39] Williams claims there is "a strong precautionary motive in the amount of cash being held" by NFCS firms, in the eurozone European Economic and Monetary Union which is "trapped in a quagmire of austerity, high unemployment, and political uncertainty".
[17][18] GSG countries accumulated reserves in the "context of foreign exchange interventions intended to promote export-led growth by preventing exchange-rate appreciation".
In Robert Lucas' classical paradox described in the article entitled "Why doesn't capital flow from rich to poor countries?"
and published in 1990 in the American Economic Review, Lucas questioned[43] the validity of the assumptions of the neoclassical model that gave rise to differences in the marginal product of capital.
For example, in 1988 in India, a poorer country at that time, the marginal product of capital should have been 58 greater than in the United States, a richer nation.
Probably the most renowned boom-and-bust cycle was the surge of private capital flows to emerging markets during the 90's that ended with a succession of crises, starting with Mexico in 1995 and then touching East Asian countries in 1997–1998, Russia in 1998, Brazil in 1999, Argentina and Turkey in 2001.
The following boom to emerging markets during the 2000s was again interrupted by a sudden reversal of capital flows during the global financial crisis following the Lehmann Brothers collapse in 2008.
[48] Don Drummond, who was formerly the chief economist for TD Bank, argued that reluctance of Canadian businesses to invest capital is a problematic, long term pattern.
[19] From the perspective of monetary economics, the savings glut idea has been criticized as conceptually flawed, ignoring the role of credit creation, and related unsustainable asset price booms.
Specifically he cites the China–America dynamic which he refers to as Chimerica where an Asian "savings glut" helped create the subprime mortgage crisis with an influx of easy money.
In contrast, in the Austrian economic theory the banking sector plays a crucial role for transmission of monetary policy.
Low interest rates could lead to malinvestment and speculative exuberance on financial markets, which can impair long-term growth.