The Oracle of Omaha has become the Nutcase from Nebraska. Warren Buffett, currently the third wealthiest person in the world, was once a voice of reason in the world of investing. In January of 2004, he had an article published in Fortune Magazine titled “Squanderville Versus Thriftville.” The article was widely acclaimed and is a must read for anybody trying to understand the economic relationship between China and the United States. Simple and brilliant, the article displays that Warren Buffett had a sound understanding of macroeconomics to accompany his investing talent. However, Warren Buffett now dances to a different tune. He no longer warns Americans of inflation or a declining dollar. He has become a confidence cheerleader.
Following the S&P downgrade Warren Buffett came out and announced, “In Omaha, the U.S. is still triple A. In fact, if there were a quadruple-A rating, I'd give the U.S. that.” This statement is a direct contradiction to his “Squanderville Versus Thriftville” essay. Since his 2004 essay, the National Debt has ballooned from 7 trillion to 14.7 trillion, the dollar has continued to decline, domestic production is down, and consumption has risen. So why would Warren Buffett do a complete 180 with his view on the trade deficit and how it affects our credit? It doesn’t take a rocket scientist (or a Princeton Economist) to see that sovereign debt across the globe is suffocating what may be described as a comatose economy. But this is AMERICA! We are the most successful and powerful nation! We will not admit to be being broke! We will continue to spend and ignore our debt until Daddy takes away our credit card! Substitute China for Daddy and Printing Press for credit card.
Maybe Buffett realizes the severity of the situation and is doing this to inject confidence in the domestic markets. He has always kept his investments confined within the United States. Soon he may be recommending specific American stocks such as GE, Goldman Sacs, and Bank of American. All of which he is a large shareholder receiving preferred stock at high 7-10% usury rates.
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