More from the Fed rubber chicken circuit:
Fed's Gramlich says low U.S. savings a concern
WASHINGTON, Nov 4 (Reuters) - Federal Reserve Governor Edward Gramlich said on Thursday that low U.S. savings were a cause for concern but not for alarm, while foreign investment in the United States may decline.
In a speech prepared for delivery to a conference on credit research at Georgetown University, Gramlich said there appeared to be a ''personal saving deficiency'' but it was hard to say definitively that U.S. savings were too low.
''Perhaps we should say that while there is not cause for alarm, there are grounds for concern,'' Gramlich said, as a wave of baby boomers born after World War II move toward retirement.
''Many families may be looking at potentially large declines in their standard of living'' because they did not save enough, he said.
He said that national savings were beginning to recover from lows reached in the late 1980s and early 1990s but said the United States still was importing foreign savings in the form of investment.
''Presumably foreign savers will not want to build up their U.S. assets without limit, which is another way of saying that at some point the foreign saving inflow is likely to taper off,'' Gramlich said.
''That will require some adjustments in the U.S. economy --some combination of higher exports, higher interest rates, lower investment, and/or lower dollar values,'' he said. ''These adjustments need not be painful, though they could be.''
One way to prevent having to make such adjustments would be to raise national savings, Gramlich said, noting that the appearance of federal government budget surpluses was helping overall national savings.
''But the rising national saving is still being supplemented by large-scale foreign saving, implying a hefty trade deficitthat probably cannot continue and will require some macroeconomic adjustments,'' Gramlich said.
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