MercoPress. South Atlantic News Agency

Warren Buffett says US economy still has not begun to climb out of recession

The Sage of Omaha predicts it will take time but the US economy will “turn up”

The United States economy has not begun to climb out of the worst recession since the Great Depression but the 'terror' that followed last year's near-collapse of the financial system is gone due in part to government intervention, billionaire investor Warren Buffett said this week in California.

”At the moment we don't see it getting better or worse, but that's better than you could say six months ago” said the Wall Street guru known as The Sage of Omaha for his long history of successful investments.

“The US economy has not turned up but it will turn up” he told Reuters in a brief interview at a Fortune conference in Carlsbad, California. Buffett also maintained a positive outlook on the US government's much criticized Troubled Asset Relief Program (TARP) for banks, saying it may ultimately turn a profit for the government.

“We were right at the brink” Buffett told Carol Loomis, Fortune senior editor at large. “This country was becoming not only dysfunctional, but nearly inoperative.”

In fact, Bank of America chief executive Ken Lewis may have “inadvertently” helped save the financial system a year ago by arranging for BofA to buy troubled Merrill Lynch in “virtually a 24-hour period,” according to Buffett.

If Lewis hadn't, Buffett said Merrill “would have been gone in a nanosecond,” joining Lehman Brothers in going out of business.

Buffett said the housing market has shown signs of improvement and that markets in certain parts of the country could stabilize within a year. But the pullback in consumer spending that has occurred as US unemployment has risen to a 25-year high could remain in place for some time, he said.

“I think that change in behaviour is going to be long lasting, and that may mean that the recovery will be quite slow,” he said.

Earlier this week the chairman of the Federal Reserve Ben Bernanke was more upbeat about the overall situation.

“From a technical point of view the recession is over”, although he warned that the US economy would continue to be perceived as “very weak” for some time.