Buffett Says Federal Debt Poses Risks to Economy

Discussion in 'Wall St. News' started by S2007S, Aug 19, 2009.

  1. S2007S


    How come it took him this long to realize this, as soon as the fed started printing free monopoly money this was a given fact that debt was going to be a huge problem, its obvious what the fed is doing is only making matters worse, yet the stupid talking analysts and dumb foolish bulls believe this is the best thing to happen, it will only be a problem moving forward. I am sure not many understand this. This is not a quick fix, throwing massive amounts of worthless dollars at an already downward spiraling economy is not the way to go about and fix the problem.

    Buffett Says Federal Debt Poses Risks to Economy (Update1)

    By Shamim Adam

    Aug. 19 (Bloomberg) -- The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said.

    The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”

    The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.

    “Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

    The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said.

    Record Deficit

    The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July. The excess of expenditure over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history, the Treasury said Aug. 12.

    Officials must still do “whatever it takes” to get the U.S. economy back on its growth momentum, Buffett wrote.

    “Once recovery is gained, however, Congress must end the rise in the debt-to-GDP ratio and keep our growth in obligations in line with our growth in resources,” Buffett said. “With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.”

    Dollar Index

    Pacific Investment Management Co., which runs the world’s biggest bond fund, said in an Emerging Markets Watch report that the dollar will weaken as the swelling U.S. deficit erodes its status as a reserve currency. The Dollar Index, which tracks the greenback against a basket of currencies, has fallen 12 percent from this year’s high in March.

    “Unchecked greenback emissions will certainly cause the purchasing power of currency to melt,” Buffett said. “The dollar’s destiny lies with Congress.”

    Buffett is the chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc. Buffett built Berkshire into a $155 billion enterprise over four decades with dozens of acquisitions, buying companies that sell ice cream, lease private jets and operate power plants.

    Berkshire has been buying securities issued by governments outside the U.S. The company held about $11.1 billion in foreign government bonds in its insurance units as of June 30, compared with $9.6 billion three months earlier, Berkshire said in a regulatory filing on Aug. 7.

    The value of holdings in U.S. Treasuries and so-called government sponsored enterprises slipped 5.3 percent in the three months ended June 30 to about $2.5 billion.
  2. Daal


    When he will admit the US is screwed for the next generation? Apparently for him absurd debt to GDP ratios, higher taxes, more government, more regulation , more inflation wont impact the country long-run potential. He is even willing to put all his networth in a frigging bank stock
  3. Show me proof that "it's obvious what the fed is doing is only making matters worse." The effects of the fed policy in the future remains to be seen, but as of right now, what have been the adverse effects? What the fed has done is restored confidence. Do you understand what kind of shape the economy would be in right now if the fed did nothing?! You think the economy is doom and gloom now, what do you think it would look like with multiple major bank bankruptcies that would cause main street to have the living shit scared right out of them.

    Even Buffett stated that what the fed did was necessary, but the debt needs to be reeled in once the economy is sufficiently stable, which I 100% agree with. Nobody knows what the future holds, but as of right now I am applauding the fed.
  4. he's short'n tbonds...