I think we’ve reached the limits of the monetarist view of economics. Monetarists argue that only interest rates matter, and that in looking at an economy, you should ignore everything else. The trouble with that is 1) I think it’s obviously not true and 2) even if it were true, it’s totally useless for what is going on now. The US has lowered interest rates to zero at which point monetarism becomes useless and you have to think of something else.
My own feeling is that we’ve also reached the end of the line for “mathematical economics.” This is the notion that you can understand an economy by just looking at charts of numbers rather than looking at the institutions within an economy. Again, the trouble is that 1) it’s obviously not true and 2) even if it was true, it is useless. Telling China to “raise household consumption” is an utterly useless piece of advice if you offer no ideas as to how to go about doing that.
The whole idea of a “saving glut” is an example of tunnel vision. If someone thinks that the only that thing matters are interest rates and quantifible numbers than “savings glut” is the only answer people can provide for what happened, but that is because they stuck to a theroretical view of the world that rejects looking at anything else, and I think that it useless way of looking at the world in part because it is self-contradictory.
Suppose you end up saying “Chinese save too much, they should save less.” At that point you are stuck because without looking at things other than interest rates, you can’t come up with ways to have them save less. And if you can come up with ways to have Chinese save less, then you probably also could have come up with ways to have better things done with those savings.