Well it's about time Buffett came around. Been making the case repeatedly and painfully. Since the day we launched. The debt and deficits are going to kill Obama. A $2 trillion deficit this year is 4x(Bush). That's a big freaking number. Warren Buffett finally got on board the sanity train with his editorial in this morning's New York Times 'The Greenback Effect'. The shit stat of the whole piece is that we are spending 185% of what we take in this fiscal year.
Here are a few thoughts from the Oracle (yet none of this is new information):
- "To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory."
- "An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money."
- "Then take the second element of the scenario — borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks)."
- "Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime."
Henry Blodgett and Aaron Task discuss the Buffett editorial.