PRESTOPUNDIT

U.S. budget deficits pose a problem for both the domestic and world economies, but there seems little political will to fix them, Federal Reserve Board Governor Edward Gramlich said on Saturday .. In 10 years when the huge baby boomer cohorts begin to retire, we will really have problems," he added, saying the national savings rate was at a record low and would only weaken further when demographics shifted. "This is a significant problem," he said. Gramlich urged a return to the budget limits of the late 1990s that have since expired. "I thought that was quite successful," he said.

The Fed governor said many Asian countries, particularly Japan and China, are fueling their export industries by supporting the dollar and keeping their own currencies cheap. "How long can they do that? If they begin to have inflation in their own countries, which is getting close in China, they are going to probably have to stop," Gramlich said.

"So we have a pretty unstable world situation. Right now," he said.