mpc.theyserveforyou.com

mpc: 3 Nevertheless, the low level of long-term forward real risk-free interest rates was still a puzzle. The Committee noted three main possible explanations: a higher expected global propensity to save, a lower expected global propensity to invest, or a temporary mis-pricing of long-dated financial assets. A range of arguments could be advanced for each of these. For example, higher propensities to save could reflect concern about prospects for pensions in many developed countries and the build-up of precautionary savings balances by Asian nations. However, the outlook for some developed-country public sector deficits pointed in the opposite direction. Lower investment propensities could reflect, among other factors, a desire to strengthen balance sheets and an increased caution on the part of firms following the equity market correction and concerns about corporate governance and accounting earlier this decade. But some of these factors might be temporary. For example, it seemed likely that in China the aggregate propensities to save and invest would both eventually fall from their current high levels.