“Savings flow…”
(… and no, it's not a typo. Just as the Sewer was not a typo, which was a political error . The savings that flow in, on the other hand, is a macroeconomic error …)
I'll have to keep this short, because I forgot my PC's power supply at home. So, for once, no graphs or figures, just a simple explanation, supplemented (for those who like) by a little algebra.
You all remember, right, that S – I = X – M?
What do these arcane letters mean? That the excess of national savings over national investments is necessarily equal to the excess of exports over imports, that is, the balance of payments. Before delving into an explanation for those who need it and those who believe they don't, I'll give you a preview of what this identity is for: very simply, to understand how and why the dominant narrative in Europe, the one about the need to integrate the capital market to prevent savings from flowing to the US, is (for a change) fraudulent. It follows that if capital market integration (union) doesn't serve to stem the outflow, it serves something else, and you can easily imagine what it is: something that concerns your pockets.
To understand why, let's retrace the steps that lead us to this identity.
We get there from the definition of GDP from the expenditure side, which we have seen countless times (one of the latest here ):
Y = C + G + I + X – M
National production Y consists of private consumption (C), collective consumption (G), gross fixed investment (I), and exports (X), from which we subtract imports (M), because, by definition, they are not part of national production (and therefore of national income). Perhaps it is better understood if we write it as a resource and use account:
Y + M = C + G + I + X
A national community has at its disposal what it produces and what it imports: these are its resources. This amount of resources is used for consumption, investment (fixed capital formation), and exports: these are its uses. Obviously, in a market economy, production is for profit, so Y, which is the national product, is also the national income, and since coffins have no pockets, income is converted into spending: C is spending on consumer goods, I on investment goods, X on foreign residents, etc. Just as you can't use a good (or benefit from a service) that hasn't been produced, you can't spend income that hasn't been earned (the financial sector allows you to redistribute expenses over time, but since loans must be repaid, you always end up knocking on Y's door, and if he doesn't answer… it's a penalty!).
Things you should know but need to review…
Now, if we subtract residents' expenditure from the income of residents Y, we obtain residents' savings (national savings): Y – C – G = S, so if we rearrange the definition of GDP:
Y – C – G – I = X – M
and we replace it with the savings one, we obtain the relation we started from:
S – I = X – M
This clarifies how, by definition , the excess of domestic savings over domestic investment—that is, savings flowing abroad (because they don't finance productive investments at home)—is equal to the excess of exports over imports—that is, the excess of revenues earned from selling products abroad over expenditures on the purchase of foreign goods. In other words, at the macroeconomic level, a net export of goods will always correspond to a net export of capital .
With algebra you can immediately see that this is the case and it cannot be otherwise, but it is also useful to get there through reasoning, and since we are bipartisan here, we can get there from the right, or from the left.
Let's start from the right: it's clear that if a country always has X < M, or X – M < 0, that is, if the country has a structural balance of payments deficit, once its reserves are exhausted, the country will lack the foreign currency needed to pay for excess imports because it won't export enough to procure it, and so it will have to borrow, borrow abroad, and import capital (and in the event of a sudden stop in this financing— a current account reversal— it will have to restore the balance of payments to surplus through austerity). In any case, its net foreign position will worsen, either due to a reduction in foreign assets or the incurring of foreign debt. It doesn't take much to understand that if a country is a net importer of goods, it must necessarily be a net importer of capital, simply because this capital is needed to finance the excess of imports over exports. Put another way, if it failed to be a net importer of capital—that is, if no one lent it dollars—that country would no longer be able to be a net importer of goods, because it would not have dollars to pay its suppliers. Behind an accounting truth there is always an economic truth.
But if this is understood, then it is also clear that when exports of goods are in excess, that is, when X – M > 0, then the country that is a net exporter of goods is also a net exporter of capital, that is, it lends money to the rest of the world (exactly as the net importer borrows money). Moreover, we are looking at the other side of the same coin: just as if a country were unable to be a net importer of capital (that is, if it did not borrow money from abroad), it could not be a structural net importer of goods, because it would not be able to pay its international suppliers, in the same way and for the same reasons, if a country were not an exporter of capital (that is, if it did not lend money abroad), it could not be a structural net exporter of goods, because its customers would not have the means to pay it, if they could not count on its loans. So X – M > 0, a positive balance of payments, has at the same time a real reading (more goods leave than enter) and a financial reading (capital flows abroad).
Let's now read our identity from the left, and let's do it with reference to our case, in the European sense, which is, as you know, the case of a structural net exporter. The expression S – I = X – M informs us of the fact that when a country is a net exporter, the savings that flow abroad are precisely those that have not found productive uses (I) at home. Moreover, with the same euro you can either finance an investment at home, or you can finance a foreign importer: the same penny cannot end up in both pockets.
Put this way, and very simply, there are two possible explanations for savings flowing abroad, neither of which has anything to do with capital market segmentation (because the identity we're describing, which governs savings flows and outflows by linking them to macroeconomic fundamentals, also holds true in a perfectly integrated economic system): either the country invests too little, or it exports too much. It turns out that these two explanations are, once again, two sides of the same coin: the repression of investment, through a policy of relatively high interest rates but, above all, through a policy of sluggish net public investment, is the basis for the increase in unemployment necessary to induce wage "moderation" and reduce costs in order to "attack" foreign markets. In short: to export too much, you need to invest too little. To put it better: what is reducing the opportunities for the productive use of savings in Europe is not the segmentation of the financial market, but the mercantilist approach of our dear German friends, intrinsically linked to a policy of repressing productive investment.
That charming, crafty Draghi ( to his friends) obviously knows this: he studied economics when and where these things were studied! So why does he continue to pontificate, proposing two things that are useless (and therefore serve something else): policies to increase competitiveness in an area that already has a massive structural surplus compared to the rest of the world, and policies to remove internal obstacles that have no impact on our net financial position abroad (which instead depends on the aforementioned massive structural surplus)? Because yes, you've got it: the argument of that amiable, insufferably babbling charlatan ("savings flow") is, algebra and accounting in hand, intrinsically contradictory! “More competitiveness” essentially means more capital outflow (because it means increasing the gap between X and M), without “more union” (of the capital market) being able to do anything about it, because there is no institutional and regulatory architecture, however sophisticated, that can subvert the laws of accounting!
And here we come to the point!
Assuming that the "flow" (i.e., the outflow: but just as people "migrate," so capital flows) of savings is a bad thing, the cause is clearly what we've seen here , namely, the repression of public investment in Europe. Let's look at it another way: if there are profitable investment opportunities in the US, it's perhaps also because the US market is "unique," but it's certainly above all because, on the one hand, the dollar remains, with its ups and downs, the cornerstone of international liquidity, and on the other, because the most significant US companies are founded on a network massively supported, in the start-up phase, by public investment ( in the defense sector ). On the other hand, the repression of investment is fundamental to "competitiveness" as it's understood here: it allows us to keep workers' demands under control, pushing the system away from the "abyss" of full employment. Austerity is a bottom-up redistributive policy, and this is something the class Draghi represents and champions likes, for reasons that are sufficiently clear. It is therefore unthinkable that our friend would propose the solution to the problem of flowing savings that common sense and accounting would suggest: promoting, rather than repressing, investments (starting with public ones, if possible by dismantling the European "rules" or at least incorporating the principle of the golden rule into them, that is, the separation of public investments from the various indicators that govern the budget rules).
On the other hand, however, the reference to the fragmentation of the capital market (and hence the saving acronyms CMU and SIU: Google it to believe it…) is not merely a diversion. The rhetoric of flowing savings intersects here with the seemingly incompatible rhetoric of idle savings (in current accounts), namely, the idea that making European stock markets deeper (i.e., putting more money into them than savers) would stimulate virtuous private investment, incentivizing productivity, competitiveness, and therefore… capital outflows (but this latter accounting truth is always omitted, to stick to the convincing, euphonious part of the ditty…)! The rallying cry, in this case, is “we need more equity !”, that is, we need more risk capital: pensioners must buy more shares and companies must go to the bank less, they must grow and list (and even this life-saving solution sounds like a scam, given that the global trend is towards delisting , that is, exiting the stock markets, to the advantage of “private” ones).
If you think about it, it's not so obvious that the man of funds (LVI), that is, of private markets, would sponsor the transition to a market-centric system, which theoretically belongs to the tradition of his country of reference (the USA). On the other hand, it's also true that here, instead, we have done the impossible to destroy the bank-centric system with the banking union , and this in some way legitimizes the idea that the void created must be filled somehow, to prevent businesses from being dramatically cut off from the savings circuit. But are we sure that the answer is the creation of a single European financial market? To put it another way: are we sure that it's in the interest of a country like ours, a saver, to pool its funds precisely at a time when reality is demanding the bill from the other major Eurozone countries (Germany and France) and the political dimension of the project is subject to evident divisive tensions? To put it another way: if the debanking of Abruzzo to the advantage of the national champion (Intesa San Paolo) has objectively not been a great gain for an Abruzzo SME in terms of easier access to credit (or at least that's how it's perceived by the entrepreneurs I talk to), why should the European single-bank market be? How, exactly, would this "union," this "integration," help our productive system? This, at least to me, isn't immediately clear. What is more obvious to me, however, is the push to channel Italians' savings, particularly pension savings, into higher-yield (i.e., higher-risk) investments, such as those available on the stock markets. This push makes sense in theory, within a "life cycle" framework, but in practice exposes the risk (which managers, subject to various levels of control, are resisting) that Italians' savings will flow into the shares of large Northern Italian companies, which are not engaged in rebuilding our country—a task for which it is essential to sustain an adequate level of net public investment—but in producing tools with which to destroy others. In short, it is difficult to resist the temptation to see the rhetoric of "capital market union" not as an attempt to stem the outflow of savings from Europe to the United States, which should be addressed on the macroeconomic fundamentals level by promoting productive investment, but rather as an attempt to facilitate the reconversion of German industry for war with Italian savings.
Here: I've now revealed the content of the tweets that the esteemed Dr. Trombetta will dish out to you in 2028, and the plot of the next "revolutionary" essay by the current Five Star Movement gatekeeper. But aside from this spoiler , for which, I'm sure, you'll excuse me, I've also indicated where the front of our war has moved and what battle is underway. One thing, however, I can tell you right away, and it's not reassuring: that S – I = X – M remains a secret to all the political actors in this process. A secret jealously guarded on the front pages of every macroeconomics textbook, and clandestinely passed down by this nonexistent blog to you, nonexistent readers. This, in other words, means that the political class lacks the minimum cultural antibodies to resist the seduction of a narrative as plausible as it is false. Naturally, I would have to construct a heroic, titanic narrative that restores to you the precious gift of hope. But I can't do that, because you still haven't answered the question I asked you in a live broadcast a few weeks ago: how much do you want to be fooled? I've always adhered to a very specific line here: telling the truth, not giving a damn about consensus. And the truth is that the things we've said here, which should be common knowledge, not just for politicians, but for the average educated person, aren't actually fully understood even by economists, who tend to skip the first few pages of macro textbooks because they contain concepts that are too simple, and as such, unsuitable for flattering their claims of intellectual superiority. And yet, accounting comes before economics (at least, if you want to avoid criminal prosecution…).
And now you know what to think of the next thoughtful editorial on the flowing savings…
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2026/02/il-risparmio-fluisciue.html on Sun, 22 Feb 2026 10:27:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.