Warren Buffet: America Has Hit The Panic Button

Warren Buffet a highly influential American has finally hit the panic button, saying that we are going to be crushed under a mountain of debt taking into consideration the amount of debt the country is piling up.

warren_buffett.giLast year, Warren Buffett says, we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover, however, we need to curtail our out-of-control spending, or we’ll destroy the value of the dollar and many Americans’ life savings.

Here are some not-so-fun facts from Buffett’s editorial today in the New York Times:

* Congress is now spending 185% of what it takes in
* Our deficit is a post WWII record of 13% of GDP
* Our debt is growing by 1% a month
* We are borrowing $1.8 trillion a year

$1.8 trillion, that’s a lot of money. Even if the Chinese lend us $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we’ll still need another $900 billion.

Which brings us to the million Dollar question “where’s it going to come from?” Most likely the printing press. And, ultimately, that will destroy the value of the dollar.

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55 Responses

  1. McLaughlin says:

    And, ultimately, that will destroy the value of the dollar, but will anyone pay attention?

    THink of the Beans and bullets concept – we can’t produce everything and keep the economy stable. We are fighting 2 wars, trying to clean the environment (OK, just a little) and figure out health care. Before 911 we were business as usual with no real war going on. We gave the environment lip service. And health care? Who ever heard of health care? Yeah we are killing both the value of the dollar and people talk about it but no one is doing anything about it.
    .-= McLaughlin´s last blog ..Using LinkedIn to Drive Traffic to Your Blog =-.

  2. kamic says:

    greed!!! print some of that money for me, i’ll join in! cause its fight for little or lose a lot!

  3. Joe says:

    I disagree entirely. I’m not worried about fortunes of people like Warren here, I am worried about or economic future. For too long the US dollar has been highly overvalued leading to a precipitous fall in exports since the late 60’s. I think that a controlled inflation would help to balance our trade deficit while allowing us to undertake valuable and long lasting projects (healthcare overhaul, bridge repairs…) and leave us in a better place in a few years from now when we are energy independent and back on our feet.

  4. Jeff says:

    It is not health care reform or the environment that is bringing the American economy to its knees its your military spending. Currently the US spends slightly more than twice what all European nations put together spend while representing the same basic number of people. Health care reform and the environment doesn’t add up to the money wasted on the F22 or the B1 or the B2 or the F117 none of which will ever have a legal export market.

    If you want a balanced budget stop spending like drunken sailors at a whore house. Americans are currently fighting to wars that were largely caused by the US in the 80’s. The US government created the camps in the SWAT valley that the taliban use today, the US government sold the chemical weapons to Iraq that you were supposedly searching for. Each time your military invades a country the American economy bleeds and it must stop.

  5. Slater says:

    This is a shoddy rehash of Buffett’s NYT op-ed.

    His conclusion from the op-ed:
    “Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.”

    I would hardly call that “hitting the panic button.”

    You can find the rest of his article here:
    http://www.nytimescom/2009/08/19/opinion/19buffett.html?pagewanted=2&=1&ref=global

  6. Ruggy says:

    “‘Last year,’ Warren Buffett says, ‘we were justified in using any means necessary to stave off another Great Depression.'”

    I disagree. The above is a self-serving comment. We didn’t actually stave off anything. This being “crushed by a mountain of debt” will in fact be another Great Depression. But thanks to Mr. Buffett’s endorsement of unprecedented deficit spending, we will be far more crushed under this debt than we otherwise would have been.

  7. Corey says:

    During the depression we spent 125% of the GDP in the years when FDR was in office to get out of this mess because most of the cash had been locked up into large government pools (similarly as today) AND there was a huge amount of inflation (similarly as today). We have the money, and we have been saving it for a rainy day, and that is today. Warren Buffet, you are wrong about this and you have unfortunately been watching too much Fox News. Perhaps you should be going back to 11th grade economics class, which is coincidentally where I get my information.

  8. Steve says:

    Where’s the link to the editorial that you’re writing about?

  9. fdf says:

    Warren, the American elite/government doesn’t care. They will use inflation to solve the debt problem. The ultra rich will be protected from this, and to the government, these are the only valuable people who matter anyways. What will really happen is that the middle class will be thrown into chaos and despair. But no one in the government will give a crap.

  10. David says:

    Okay, Mr. Buffet …. Now what? How do we fix this? End these Wars, & stop big Government spending? We need to start lending money again, with checks in place so we do not let the same things happen again with our banks. People are crushed now and it seems like we can only expect worse things to happen…. I want to know how we can fix this ?? ANYONE????

  11. Arnold Lazro says:

    It always bothers me when people act like the US government can or does just take money “from the printing press.” I don’t think you meant it like that–you don’t seem like the kind of person who thinks that the US Government can just print money, take it, and use it to pay debts, but using that terminology continues to confuse people.

  12. David says:

    Lets just go back in time to Bill Clinton and the Tech Boom, Please….

  13. Pedro says:

    sources

  14. Wokka says:

    Arnold Lazro – This is exactly what our government has been doing. The bailout? Printing press. Next bailout? Printing press. Congress authorizes the government to “borrow” money from the FED, who is only too happy to punch a few buttons and presto, the account balances have gone up.

  15. Sam says:

    you think American tax dollars easily pay the debt. If that was the case the national debt wouldn’t grow at over 10% a year. The truth is tax dollars barely cover the interest on our debt.

  16. Kevin says:

    Wait a minute! Buffet was just telling us that we NEEDED the bailouts, now he’s telling us we’re spending too much?? Where I come from, we call that SENILITY! You people have been calling him a genius long enough. He was wrong when he said we needed bailouts, big time, and now he has the nerve to point out that we’re going the way of the dodo bird! What a dick!

  17. Elmer Homero says:

    here is a wild thought…how about selling back to Mexico, Texas, Arizona, New Mexico and California, i’m sure that would be enough to pay your debt 🙂

  18. manifest says:

    I think we were screwed when Bush was still in office and we voted for the first $700 billion bailout. How many trillions have we printed since? Now there’s this great excuse that we HAVE to bail out more of our failing economy because it was all Bush’s fault. No one can blame Obama because he wasn’t in office when the economy took a crap. Yet his administration has printed more money than any other through his “stimulus” bills.
    And yet any attempts to audit the Federal reserve are thwarted by congress. Instead of raising taxes, state governments just start trying to tax internet sales, raise driver license and registration renewal fees, pass energy bill legislation that triples electric bills, raise taxes on cigarettes, jump through all federal hoops to get bailout money, and force everyone to pay for social health care. Let’s not forget about upcoming food safety bills designed to force farmers to purchase expensive equipment in order to stay within the new regulation and generalizing food production so that you can’t even grow your own food in your back yard. But then you might be too busy with what I’ve already mentioned to notice the militarization of our police force, army brigades stationed for crowd-control and the branding of right-wing Ron Paul supporters as violent domestic terrorists. Now that’s serious stuff because as soon as you are named as an “Enemy Combatant” of the United States you have about as many rights as someone in Guantanamo (which they never actually shut down). Or how about the setting up of mandatory vaccinations for the H1N1 flu having a smaller mortality rate than the common seasonal flu! I think anyone who does even the smallest amount of research in these topics can see where things are going and these so called “solutions” that the government is always proposing are quite the opposite.

    “no one is doing anything about it.”
    I guarantee you that millions of normal citizens are trying to do something about what’s going on. But the people don’t control the printing press and the politicians don’t have to care about anything but their lobbyists.

    If it isn’t clear already I think Mr. Buffet was a little late on the draw. This country is being systematically attacked and dismantled on all sides so that the few rule the many. It’s really that simple. And if I stated this opinion to enough people, I’d get thrown in the right-wing nut job category simply for threatening the psychological feeling of safety created by payed-for mob opinions.

  19. Rick says:

    Wow, Some of the posters on here do NOT show Mr. Buffet the respect he deserves. He is the greatest business man of our time, and he has class, he lives a simple life and has donated \ committed over 50 billion dollars of his personal fortune to worthy causes.

    He is a brilliant man and he made his money without running ponzi scheme’s or selling cigarette’s.

  20. Keith T. Syverson says:

    Not to impugn the honor of Warren Buffet in particular, but over the last many decades, our domestic capitalists have failed to translate the much-vaunted economy into an improved society, despite their gaming of the politics and culture. If the operating model of this ideal was systemic progress by competitive incentive in myriad nested markets, it hasn’t trickled down efficiently enough. We the economy have zoomed past post-industrial, service, information and are trying to settle into a green with a rocket strapped to our backs.

    That the government is now on the fraying rope bridge of de jure debts and de facto obligations is an entirely preditable (and many have) situation of framed helplessness upon a foundation rotted by special interest infestations. If a house divided cannot stand, what of such a structure?

    Is it any surprise we are at war(s) for oil interests, but were sold ‘Regime Change’ ™ and marketed down to as ooga-booga death threat scary? Then, without scrutiny, a stable supply and flat demand for that commodity inexplicably skyrocketed in price while the world of six billion heads were scratching? As speculation swelled to scam, the pain finally broke the levy of the managed ignorance over our mismanaged impositions. Impositions such as a circle of guns around a blasted city flooded out and left to thirst and starve on its own. Leadership congratulated our disaster (response) and congressional Republicans voted unanimously to block even so small a thing as to establish an investigative commission to white-wash it.

    Then, the mushroom cloud smoke-blowers peddled their snake-oil in the financial collapse and now again with the the health care deba(t/s)e. The continuing success of this method and perverse complicity of much of the media is all these special interests admire, despite the cynical awareness of its unsustainability. Has so much of the private capital wisely fled that only the people’s treasury remains to trick for quick bonus? These days, the truth of need is mutilated by a circle of Jack The Ripper opinioneers before it can actualize as effective policy, public or private. We’re lucky to catch a glint reflected off the brandished blade as it menaces over the crime scenes.

    No, we can’t imagine the public debt and we can’t imagine its cost, but there’s been no interest in making it of special concern. It was bad enough when we were marketed down to with narcissistic hedonism, but the new trend of hubristic boys who cry wolf is the last bracket. It seems as if only the seeming is left of the value of so many things, not to mention values themselves – much less the dollar or the cost being caught in the invisible cats-paw of market force.

  21. David says:

    A dollar bill is .0043″ thick. A stack 1″ high has about 233 bills in it. If you took 1.8 trillion bills and stacked them up, then laid that stack down around the equator, 1.8 trillion dollars would make 4.54 trips. With the new figure of 1.58, it is only 4.31 trips.

  22. Mike says:

    A co-worker of my neighbors had an interesting concept. Pile up the debt, destroy the dollar and the American middle class. That puts the leadership in the perfect position to create a US/Mexican/Canadian currency to form a North American Union that can compete with the European Union and Chinese labor.

  23. Sam says:

    . . . so after our money is useless, think they’ll finally introduce the Amero?

  24. Van says:

    The fix (you won’t like it, politicans hate it)….
    -much higher consumption taxes, especially on cigarettes, alcohol, gasoline( you name it)
    -a new federal sales taxes on everything, on top of higher state sales tax
    -higher income taxes
    -higher corporate taxes

    or…. the alternative of denial
    is hyper inflation and a dollar that buys less and less, then suddenly it becomes worhless.( see ruble, etc,,,)

    In the meantime…..
    the guys at Wall St will have a harder and harder time trying to find a customer who wants to buy that new bond issue, and the next bond issue, and the next bond issue, and the next bond offered by the US govt to finace its ongoing debt obligations and settle maturing bond issues.

  25. Patrick says:

    This nation needs an honest education and discussion about the nation’s economy.

    That includes the role of the Federal Reserve, corporate welfare, government spending, personal consumption, the banking industry and health care.

    Anyone who points to a single element, behavior, political party, political bent, is either self-serving or simple-minded.

    What happened to citizenship?

  26. Bob Obvious says:

    Roll back the tax cuts that got us into this situation. Duh!

  27. SadistiX says:

    The economy is recovering but the situation is still really fragile. AIG, Freddie and Fannie still cannot survive without federal assistance. If any of them fails, the system will collapse. The nightmare is far from over.

  28. Jason Huang says:

    Bullshit on whoever said dollar should be value lower. That would destroy a lot of people’s savings and ruined a lot of lives. That destroyed the only real advantage of American live vs. other countries.

  29. Ruggy says:

    The interests of a multibillionaire fund manager who is nearing 80 years old, and the interests of the rest of us who will be slaving for decades to pay off this debt – which his advice has only increased- do not coincide, but rather, our interests diverge considerably.

    If hypothetically, I owned $40 billion in my late 70’s, I’d be solely concerned about making it to my next birthday without my empire imploding on my watch. I’d even advise the President of the United States to waste trillions of dollars if it might prop up my enterprises long enough for me to reposition my holdings.

    Well, I think Mr. Buffet certainly accomplished that. Too bad he won’t likely be around to see the bills come in. Too bad for us.

    Out of sheer revenge, I hope Mr. Buffet lives an unexpectedly long life, even beyond 100, so that his soul may witness the devastating results of his shortsighted and selfish economic advice to the Preesident.

  30. Patch says:

    Personally I want the dollar to be devalued and have run-away inflation. Everyone thinks inflation is bad, but it can be good. As an example, I owe $410K on what was a $899k home. With run-away inflation my paycheck will grow while the value of the dollars I owe on my home goes down, thus allowing me to pay it off faster.

    Inflation! It’s great for homeowners with large mortgages! Sucks for people invested in the dollar. The only warning signal here is to move to global funds and if you don’t already – go buy a home and max your loan!

  31. Bob says:

    #3
    and leave us in a better place in a few years from now when we are energy independent and back on our feet.

    They say that necessity breeds invention, especially in rough times. I just hope that we haven’t waited too long to move towards energy independence. It’s truly depressing to think of where we may be at if we spent the money which was spent on our on research and development of renewable energy technology.

  32. Eggy says:

    To Corey: “cash locked up in government pools” – Where do you get this from & Who is teaching your 11th grade economics class?
    Our government is deeply in debt & once the debt payment is greater than the revenue it takes in, it can no longer function – it’s bankrupt – and that’s where were headed if changes aren’t made – and SOON – and that’s what Warren was saying. He’s a lot smarter than the idiot teaching your class, and has years of experience to prove it. And by the way, FDR had nothing to do with getting the US out of the Great Depression, WWII and post WWII were the vehicles that did that. – Read your History books. The US became the only industrial giant left in the World after the war, so we were geared up to provide the world with almost everything – and did.

  33. Sergio says:

    Lets just go back in time to Bill Clinton and the Tech Boom, Please

  34. lolo says:

    It’s all by design, just like what we did to USSR in 1990. Economic warfare. US is going down.

  35. AvangionQ says:

    What you’re describing here is end stage hyperinflation — when the debt exceeds the GDP will be the tipping point for when our debt exceeds our ability to repay the debt and our economy collapses under the weight of it … worse yet, this outcome may come sooner if debtor nations call in their loans or flood the market with dollars as they trade them in for other currencies … historically speaking, if this debt isn’t absconded upon before the economy collapses, a violent revolution tends to occur — an outcome I’d prefer to avoid … in large part, I blame the Federal Reserve bank for their fractional reserve banking, and look forward to its audit …

  36. TomQ says:

    Why? So his banking regulations can create a false boom and fail again?

    I’ll pass thanks.

  37. Well said Rick. Warren Buffet does deserve a lot more respect then he is getting here. Here is a man that shunned investing in the dotcom boom fiascal because he felt “unqualified” to know enough about it. That is a humility that is rarely showed elsewhere in the markets and is a personal trait we would benefit to see more of in our leaders.

  38. Sergio says:

    It is so interesting!!! I’ve read something of the kind, but this article made me understand much more!

  39. Hal says:

    In my opinion, given this outlook which others have shared, gold and silver are going to run.

  40. J. M. says:

    We’re complaining about the debt now that Obama is in office? Please! Bush started 2 wars and was bleeding money. Where was the fiscal restraint then? Republicans are a bunch of hypocrits and biggots.

  41. Jeffrey says:

    What you all are missing:

    1. Once We hit a point we will be invaded by China and/or Russia.(Its not a point of whether we can win or not, If we do not get our heads out of our asses) We need not worry about inflation or the dollar loosing value as much as we need to worry about a growing influence by the chinese across the globle. The Chinese are in central and south america playing the role the US used to play before we became world police. The Chinese are in Africa playing a developemental role similar to the role the US used to play. Loan money, build economies on the back of Chinese made products and services.

    Does Health Care really need to be done today? NO …. we have more important issues, to be looking at.(and they are not the environment) We will have no Heath Care if we have no country. We are on the verge of that breaking point, we are over extended around the world, and esp. at home.

  42. Frank Linn says:

    J.M. … So it’s okay for Obama to quadruple (that means multiply by 4X) the deficit in 6 months because Bush started it? Why do you think the Repubs lost the last election? Overspending! (amongst other things) when I hear someone, such as yourself, use that lame-ass excuse, it reminds me of a 4 year old caught doing something wrong and blaming his friend, “But Georgie did it first!”
    Obama has increased the deficit more in 6 months than all previous presidents combined. Lay off the kool-aid.

  43. Keith T. Syverson says:

    Our political attitude towards the rest of the world will be restrained by our inability to buy off obedience. This will have dramatic effects not even imagined by the most paranoid and cynical.

  44. Ron says:

    These responses are characterised by sentiment; past mistakes, impugned motives, future guesses or wishes. Let’s just accept Buffett’s forward-looking premise (debt service issue) on its merit, since it seems financially incontrovertible. Then the question is: How do we get the Congress to eventually show fiscal restraint? This is where the dialogue should be focused. My take is that the special-interest groups (unions, lobbies, coalitions) that feed the spending beast must be soon supplanted by the will of what remains of the productive populace, lest we all become de facto wards of the state. In the age of instant information and communication, we have got to be able to engineer a more direct representation of the people.

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