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Posts Tagged ‘inflation worries’

Warren Buffett: ‘Not off the bottom yet’

Posted in Uncategorized, tagged , , , , , , , , , , , , , , on June 25, 2009| Leave a Comment »

Here is a commentary from Warren Buffet on the economic crisis.  It is a reworked piece from “The Swamp”, Chicago Tribune´s Washington blog, written by Mark Silva.

“We have not come off the bottom yet,” Warren Buffett says.

“Buffett, the multibillionaire oracle from Omaha and informal adviser to President Barack Obama, says the actions that the federal government is taking today raise the “probability” of “very significant inflation down the road,” but they are necessary and “appropriate.”

“What we’re doing raises the probability significantly of very significant inflation down the road –not this year or next year or the year after that.. But we’ve taken actions and they were appropriate actions,” Buffett said in an interview with FOX Business Network’s Liz Claman.

“It will have consequences, and nobody knows exactly what they will be and how effective we will be at draining a system we’ve been flooding, but the probability of significant inflation has gone up,” Buffett said. Asked about the possibility that the U.S. is issuing too much debt to pay for all the bailouts and economic stimulus underway, he said: “Well, it’s doing what it has to do. And it was appropriate.”

With unemployment already clocked at 9.4 percent last month and expected to surpass 10 percent in the months ahead, the CEO of Berkshire Hathaway – its legendary stock down to the $86,000-per-share range since the recession took hold – said of the jobless rate: “It’s going higher — business has not bounced back. We have not come off the bottom yet…

“It will work out in the end,” Buffett said. “Since 1776. it’s been a mistake to bet against America. America solves its problems. How soon, nobody knows. But we have not come off the bottom yet. And it will work out in the end.”

Read and see the full interview here.

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Get Ready for Inflation and Higher Interest Rates

Posted in Board Of Intellectual Capital, boic, Business models, Distressed IP, Economy, Gerbsman Partners, Investments, Market research, Strategy, Venture Capital, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , on June 12, 2009| Leave a Comment »

Here is an interesting post by Arhtur Laffer at Wall Street Journal.

“The unprecedented expansion of the money supply could make the ’70s look benign.

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be “wasted.” Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That’s more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers’ expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs — such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid — are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.”

The story concludes…

“Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury’s planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.

In addition, a rapid contraction of the monetary base as I propose would cause a contraction in bank lending, or at best limited expansion. This is exactly what happened in 2000 and 2001 when the Fed contracted the monetary base the last time. The economy quickly dipped into recession. While the short-term pain of a deepened recession is quite sharp, the long-term consequences of double-digit inflation are devastating. For Fed Chairman Ben Bernanke it’s a Hobson’s choice. For me the issue is how to protect assets for my grandchildren.”

Read the full article here.

Others covering this story include: NCPA, Market Guardian, Bully Pulpit.

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