It is from this pool of money that businesses borrow to make the investments in new factories and equipment that boost productivity. Pa. But a large pool of savings is not all that's needed. The money must also be invested wisely. And that is where Japan and other Asian nations have gone wrong, analysts say. Too often, the Asian money went into building factory capacity that was not needed or office towers that now stand vacant.
Japan has a highly regulated, highly insulated system.
In the United States, by contrast, venture capital firms are constantly looking for the next hot idea, ready to invest. Foreigners, also, are eager to grab higher returns by investing in the United States. That flow of foreign money offsets the smaller pool of personal savings. None of that, however, explains why the U.S. savings rate is so low. Economists admit they don't have any easy answers.