MILAN - Although the financial crisis is winding down, the prospects for growth in the global economy are unlikely to pick up. This is, in part, inevitable. But it is also the result of poor coordination between governments as the world economy rebalances.
Prior to the crisis, American consumers, on average, either saved nothing or accumulated debt. That has now changed. With household wealth seriously damaged by the housing crash and other asset-price declines, pensions and retirement provisions are in disarray. Because asset prices will not reach pre-crisis levels anytime soon (that is, without inflating another bubble and risking renewed instability), household saving in the United States has risen to about 5% of disposable income, and probably will rise further.