Monthly Archives: March 2012

The real interest rate on US and UK government debt is currently near to zero (see chart 1). This is a remarkable fact. True, real interest rates were negative in the 1970s. But it is extremely unlikely that anybody bought bonds expecting this to be the case.

Now, however, the position is quite different. Both of these governments sell index-linked debt that delivers zero real returns. That is a demonstration of the fact that the world has a huge “savings glut”. Indeed, since savings must equal investment at the global level, it is only by its price – the rate of interest – that one can assess whether such a glut exists.