Bernanke on National Saving

A smart economist emails me a question about the Fed chairman's most recent talk:

I'm wondering what your reaction is to Ben's latest "global savings glut" speech.

Ben's conjecture that real interest rates have fallen as a result of increased saving among emerging and oil producing countries seems plausible to me. What strikes me as off kilter, though, is the normative conclusion he draws, that the current account deficit therefore poses a problem of insufficient savings domestically. Arguments for insufficient saving often have as starting point myopic or otherwise irrational behavior by savers. But it's entirely rational for people to save less when real interest rates fall. If a global savings glut has driven down real rates, US savers are worse off as a result, but a policy response of encouraging more saving would only exacerbate the domestic welfare loss stemming from the glut.

What, if anything, am I missing here?

I agree that Ben has not fully spelled out his logic on this point. Even our current account deficit is the result of a "saving glut" abroad, that is no reason by itself that Americans should save more.

Nonetheless, many economists agree with Ben's normative conclusion that U.S. national saving should increase. One might argue national saving is too low because the tax code discourages saving (as my colleague Martin Feldstein would emphasize), because people suffer from problems of self control (as my colleague David Laibson would emphasize), or because the U.S. government is not saving enough to deal with the coming entitlement crunch. My guess is that Ben would have sympathy for all three arguments.