OK, I promise that this is my last econ/trade post for a few days, but I've been holding on to this one and want to get it out before the end of the week. 

China Redux revisits Bernanke's argument that the proximal cause of global imbalances is the savings glut from places like China. I've written about this before (don't remember when, and I'm too lazy to go look for it) and actually have some sympathy for the argument.

Ben responds to Bernanke's thesis with this:

One could take this be a nicer way of saying that the U.S. account deficit is China’s doing. It’s the policies of developing countries that are driving this savings glut, not America’s excessive spending. And so it’s China’s responsibility to work towards a solution.

I have a different take on this. I remember the Bernanke argument from 2005. At the time, the only discussion out there was that Americans consumed too much, hence the CA deficit and the global imbalances.

Sure, Americans consume too much, but this does not lead to solving the problem. The blame-Bubba's-spending-habits argument didn't go anywhere, just made everyone in Europe and Asia feel superior.

Bernanke's contribution was to say, wait a second, where is Bubba getting all that money from, anyway? Good question. There was a reason why interest rates were low and Bubba was able to refinance his home and go on an equity-led spending spree. It made sense for Bubba to get that refi – these were reasonable consumer credit decisions.

Explaining that an Asian savings glut allowed U.S. consumption does not lay the blame on China so much as it explains that the issue is quite complex. Bernanke's argument was useful in balancing out the discourse. Here's a Bernanke quote from Ben's post:

As the global perspective makes clear, the reduction of the U.S. current account deficit also requires efforts on the part of the surplus countries to reduce the excess of their desired saving over desired investment.

The use of the word "also" means to me that this was an added part of the story, not the only cause of global imbalances.

At the same time, I agree with what Ben suggests, that many U.S. politicians took the sound bite version of Bernanke's argument (it's China's fault) and ran with it. Shame on them, although it wouldn't be the first time that a U.S. politician twisted an economist's reasonable statements into an anti-China statement.