Greenspan urges more U.S. saving for economic health
(UPDATE: Adds details)
WASHINGTON, March 13 (Reuters) - Federal Reserve Chairman Alan Greenspan repeated on Wednesday that U.S. economic activity was improving, and urged a greater emphasis on savings to improve the long-term vitality of the expansion.
Speaking to the Independent Community Bankers of America in Honolulu, the U.S. central bank chief said a rising retiree rate ahead and the need to ratchet down current account deficits meant more savings were needed.
A text of his remarks was issued in Washington.
Greenspan repeated recent testimony he had made to Congress, citing ``increasing signs that some of the forces restraining the economy over the past year are starting to diminish and that activity is beginning to firm.''
He foresaw only gradual recovery in business investment and said a stronger labor market was central to the outlook for consumer spending. ``Layoffs diminished noticeably in January and employment turned up last month,'' he added, referring to February's 66,000-job gain reported by the Labor Department last week.
RELYING ON FOREIGN CAPITAL
Greenspan noted that over the past six years, about 40 percent of growth in U.S. capital stock has been financed by foreign investment, increasing America's reliance on others and running up mounting deficits that need to be controlled because it means a growing share of interest payments are sent abroad.
``Countries that have gone down this path invariably run into trouble, and so would we,'' he said. ``Eventually, the current account deficit will have to be restrained,'' he said.
With a growing population of retirees ahead as Americans born in the ``baby boom'' years after World War Two end their working careers, keeping productivity or output per worker on a rising trend will be vital for maintaining rising living standards.
``Because of the near certainty of a major rise in the retiree-to-worker ratio in the next few decades, we now face the pressing need to set policies for the enhanced productivity growth that will be necessary,'' Greenspan said.
Boosting savings is essential even though it does not affect the number of people in the workforce. ``But it surely affects capital investment, which it finances, and the productivity that it engenders,'' Greenspan noted.
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