Aug 20 2009
Warren Buffett’s Warning to America?
I remember Obama saying he would listen to his advisers and to individuals like Warren Buffett on the economy. Well, Warren Buffett has spoken but will Obama use his ears to listen to his concerns? In a New York Times Op-Ed, Mr. Buffett speaks of the phenomenon called the “butterfly effect.”
“Every action has consequences,” Mr. Buffett begins his article. “The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy…greenback emissions.”
In the article, Mr. Buffett applauds both the Bush and Obama administration for acting quickly and points out the mistakes that were made. He continues to make the claim that the “United States economy is now out of the emergency room and appears to be on a slow path to recovery.”
Buffett points out that the “enormous dosage of monetary medicine” will have to be dealt with, along with their side effects. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be ominous as that posed by the financial itself,” Buffett stated.
The article is an eye-opening account to what is going on in our government. Some of the key talking points are Buffett detailing how the government expenditures are now running 185 percent of receipts. In layman terms, “the government is spending more than they are taken in.”
What caught my eyes was a few paragraphs were it sounds like Mr. Buffett is warning the American taxpayers to what is coming:
“Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.
In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Buffett states “We don’t want our country to evolve into the banana-republic economy described by Keynes.” Mr. Buffett also says that once “recovery is gained, Congress must end the rise in the debt-to-G.D.P. ratio.”
Now that is scary. Putting trust in Congress to stop spending and start saving. I hope President Obama and members of Congress listen to the words of Warren Buffett. The man knows the rules of Economy 101.
