Buffet: Bailouts will be paid for by a drop in the purchasing power of the US $

Discussion in 'Economics' started by ASusilovic, May 3, 2009.

  1. The cost of recent massive government bailouts will likely by paid for through inflation, Berkshire Hathaway Chairman Warren Buffett said Saturday.

    Buffett rejected the idea that U.S. taxpayers are paying more to fund bailouts of financial-services companies and the large economic stimulus package, noting that taxes in the U.S. haven't been raised for many years.

    China may end up carrying more of the bailout burden because inflation will undermine the value of the fixed payments the country gets from its large holdings of U.S. Treasury bonds, Buffett told shareholders during the company's annual meeting.
    Ultimately, the bailouts will be paid for by a drop in the purchasing power of the U.S. dollar, he said.

    "That's the easiest way to pay for these things, so that will probably be what happens," Buffett added.
    In his latest shareholder letter, Buffett warned of a bubble in Treasury bonds that may end up rivaling the dot-com and real estate booms in the U.S.

  2. The bubble in treasuries has already popped. We are going to see treasury yields at very high levels by the end of this year. Watch out.
  3. There is no other easier out. I would have said easy out, but there are NO easy outs left.
  4. So how do we play this?
  5. toc


    Get set for the new bubble which is INFLATION. :D

    Buffy is speaking right now but I have been warning about devaluation of US$ for last 2 years.

    Feels so good to be in the same league as Buffy of Omaha! :D :D :D :D :D :D
  6. Tide31


    It looks to me from this article that he is just talking up his own positions again. He has been a bear and short the USD since 2003. I wonder if he said you should own Coke (KO) as a joke to applause, or if he was really just pushing his biggest position. He owns 200mm shares, $9billion worth of it.

    I agree on the inflation issue, although I think he said it as a way to imply we should raise taxes like he usually does. I would take it one step further though. Looking at the numbers we got on Wednesday, and irregardless of us being brainwashed into thinking that Obamanomics is going to save us from this, we are looking at potentially the worst of all worlds. Something there is no real cure for:

    Real GDP - down 6.1%
    GDP price index - up 2.9%