The report finds that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio
than found in mature economies.
The debt-income ratio
rises in the short run but falls in the long run, because of higher output, inflation, and government revenue.
It is possible to envisage circumstances where interest rates may need to rise considerably, but, in my personal view, the rise in the debt-income ratio
should make us more cautious about doing so.
These periods of low saving were certainly periods when the ratio of debt to income was high, and the rising saving rate after the war did occur when the debt-income ratio
However, due to the "convenience' use of credit cards, the increase in the debt-income ratio
may be overstated as a measure of borrowing capacity.
Although household debt-income ratios
remain high, debt-service burdens have fallen appreciably, partly reflecting the refinancing of mortgages at lower interest rates.
In all leading OECD economies savings ratios were falling and debt-income ratios
rising as people were encouraged to borrow more in order to spend more.