NEW YORK (AFX) - Federal Reserve Board Governor Edward Gramlich said he is concerned with the negative U.S. private savings rate as it potentially could depress capital investment.
Speaking at a meeting of the Money Marketeers, Gramlich said "it is true that consumption is 1.0 pct more than people's disposable income" and this raises the question about how much private income is available for investment.
He said the personal savings rate is dropping "and that's a problem."
The most recent report by the Commerce Department showed that in April, the private savings rate was a negative 0.6 pct. The savings rate has not been positive since last June.
Gramlich said he is skeptical about public policy being able to raise the private savings rate.
He noted that tax cuts in the 1980s designed to boost private saving have apparently not worked.
One way to combat the negative private savings rate is by keeping the overall national savings rate high through net government saving, he said.
Gramlich listed four options to accomplish this, including investing Social Security surpluses in private assets through a government-run program or through individual accounts, and having the Treasury Department invest in private domestic assets directly.
The last option, whereby the Treasury would purchase foreign-denominated debt, probably has the least drawbacks, Gramlich concluded.