Saint Louis Federal Reserve Bank President William Poole said on Thursday that negative
U.S. savings rates probably reflected problems in measurement, but would still require a slowdown in spending at some point.
Poole, a voting member of the Fed's policy-setting committee this year, said a large part of the negative savings trend in the United States could be blamed on the omission of
capital gains from national income.
Households, though, have felt wealthier because of rising equities and home prices -- something Poole traced to a decline in global real interest rates -- and they have spent
"Household saving behavior does not seem to have changed in any fundamental way. What has changed to a degree is the trend in asset values," Poole said.
"Households have consumed some of the increase in asset values in about the same way they always have," he said.
On the other hand, this was not without consequences for the U.S. economy overall.
"The behavior of households, though perfectly sensible and responsible for households as a whole, has led to a situation in which the United States as a whole is saving too little of
its national output," he said in prepared remarks to the Chartered Financial Analysts Society of Nebraska.
So far, this has not caused a problem for investment levels because the savings gap has been financed by foreign flows of capital into the United States.
"However, at some point the U.S. net international investment position will stop becoming ever more negative," Poole said, adding that at this point, domestic savings will
have to be diverted from consumption to investment.
"There is no reason why this adjustment should be difficult or disorderly, but it will require that U.S. consumption outlays expand more slowly than ... (gross domestic product)
for a time," he said.