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Warren Buffet praises US “rescue” but warns about mounting debt

Thursday, August 20th 2009 - 05:03 UTC
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The “Omaha guru” expects US national net debt to climb to 56% of GDP The “Omaha guru” expects US national net debt to climb to 56% of GDP

US billionaire Warren Buffett said that the US economy appears to be recovering, though the “enormous dosages of monetary medicine” used to fix it might pose a threat as “ominous” as last year's financial crisis itself.

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery,” Buffet said in an op-ed published in the New York Times. “But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects.”

In the article, the Berkshire Hathaway CEO said that while the Bush and Obama Administrations and Federal Reserve Bank took effective action to avert a complete financial collapse, the US deficit will rise to 13% of GDP, --or 1.8 trillion--when the fiscal year ends in September, something he believes is uncharted fiscal territory.

Buffet expressed concerns that the country's net debt, or the amount held publicly, will increase more than one percent per month during the fiscal year, from 41 percent of GDP to 56%.

He went on to say that even with the best ways of financing federal debt—such as borrowing from foreigners or US citizens—the US Treasury will still have to find 900 billion US dollars to cover the debt, which might lead to high rates of inflation.

Buffet stressed that it was up to Congress to address ways to slow the rise of debt once recovery comes and keep all forms of growth in line. He added that “the dollar's destiny lies with Congress.”

“Our immediate problem is to get our country back on its feet and flourishing — ”whatever it takes“ still makes sense,” he wrote. “Once recovery is gained, however, Congress must end the rise in the debt-to-GDP ratio and keep our growth in obligations in line with our growth in resources.”

Categories: Economy, United States.

Top Comments

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  • Juan

    Usually, adjustment comes when money lenders stop lending.

    Aug 21st, 2009 - 07:52 pm 0
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