Buffett Warns of Trade Deficit Disaster

[Emillereid]

The Capital Times
11-3-3

<snip>
 
The corporate free trade agenda, says Buffett, has created a mess so serious that he is losing confidence in the stability of the U.S. dollar, and the economy it underpins. "I am crying wolf again and this time backing it with Berkshire Hathaway money," Buffett says of the assets of the investment conglomerate he created and controls. "Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency. Since then Berkshire has made significant investments in -- and today holds -- several currencies."
 
Buffett says he is losing faith in the soundness of U.S. currency as an investment vehicle because the United States is running a huge trade deficit -- close to $500 billion, and rising rapidly -- that is causing income to flow out of the country at such a rapid rate that it will soon become unsustainable. In the November edition of Fortune magazine, Buffett warns that the rapidly mounting U.S. trade deficit could lead to a dramatic plunge in the value of the dollar and a host of additional economic consequences that could add up to disaster for American families.
 
In the post-Cold War era, U.S. leaders embraced the corporate free trade agenda embodied in pacts such as the North American Free Trade Agreement and the granting of permanent most-favored nation trading status to China. These deals and others like them encourage U.S. businesses to engage in a race-to-the-bottom, relocating on a regular basis to countries that permit them to pay the lowest possible wages, to despoil the environment and to dismiss human rights concerns. U.S. businesses have shuttered factories, laid off unionized workers and shifted millions of jobs overseas.
 
<snip>
 
Now the abandonment of American communities and families has extended to the service sector. The shifting of manufacturing and service work out of the United States is great for the huge corporations that contribute mightily to the campaigns of politicians who back their free trade agenda. These corporations can lower their costs by moving production to countries where wages are low, and basic safety regulations and environmental protections have been eliminated. But it is terrible for workers here and abroad, who are pitted against each other in a battle to see who will work for the least. And it is horrific for the U.S. economy. ...
<snip>
 
Copyright 2003 The Capital Times
 
http://www.madison.com/captimes/opinion/editorial/60257.php

Is Buffett usually right about this kind of stuff. I mean if this guy is bailing on the US dollar, should the rest of us follow? Should we be buying euros or yen or something -- is there any where safe to build a nest egg?

[Kolesar]

1. I wish I had followed Buffet when he quit buying equities in 1999

Warren Buffet bought silver because the stock valuations were all way too high (in 1999). I was still buying stock in my IRA and 401k.

I don't much about foreign currency investing. I would imagine that an equity mutual fund of Asian or European stocks would be a good way to do equities: I own a scant amount of Fidelity Diversified International.

As for foreign cash or bonds, I should check at www.fidelity.com

[cally]

2. I hate Buffett

for his support of Arnie. His investment advice may be accurate, but his politics are abysmal.

[Tempest]

4. I feel better with Buffett behind the Gropinator

Buffett will lead Arnie with common sense.

Buffett was the only one who spoke up and stated that CA's budget problems were mainly because of Prop. 13. No one else dared speak out about it.

So far, Buffett hasn't said anything about California's problems that he hasn't said about America's problems.

[TreasonousBastard]

5. Perhaps...

he wan't exactly supporting Anrnie, but watching out for him.
Somebody has to.

[cally]

8. But he helped give gravitas to Arnies budget

ideas. Also, helped to downplay Arnies sexual abuse or women. No way will I ever support Buffet after that.

[AP]

7. I think Buffet hijacked Arnold. He said the opposite of what Arnold wanted

to hear (Prop 13 sucks).

I don't think Arnold is consulting with him anymore.

[Maple]

3. He has the right idea

just blaming the wrong cause.

But then he supported Arnold too.

[umkhonto]

6. Arnie approached Buffett for Support

I seem to recall it was Arnie who approached Buffett for support. I would not think that Buffett would pass up an opportunity to inject some common sense into the stewardship of the world's largest economy.

Buffett is a testament to sustainability - he is the complete antithesis of the likes of Bloomberg etc.

[Bandit]

9. "causing income to flow out of the country at such a rapid rate "

To offshore companies like Haliburton and Betchel. They are not American Companies anymore so I guess they contribute to our Trade Deficit. The more money that goes to these "un-American" Companies the worse it becomes. No-Bid Contracts with Foreign Firms. Only foreign so they can "EVADE" American Taxes. So they don't pay taxes and contribute to Trade Deficit and we keep hiring them. Why?

[TreasonousBastard]

10. Buffet didn't make all those billions...

by being wrong about things.

If I had vast amounts of money, I'd buy gold and Euros. Main problem is the transaction and brokerage costs involved if you're typically mid-American with some savings. Buffet can buy all this stuff for his own account with his own traders. We have to go to a bank or investment house and get a sorry exchange rate and pay fees for the privilege.

Takes a bundle to get the fees down to a manageable level.

[Jacobin]

11. Bingo

You don't create $40 billion in wealth from nothing and not know what the economy is doing and is about to do.

Say what you will about Buffett. He's for corporate accountability, he's against abolishing the estate tax, he came out publicly against Smirk's tax cuts.

He's no repuke.

He's a moderate dem because he knows that is what creates wealth and jobs in this country.

[sendero]

12. I'm surprised...

... at the Buffett bashing. I could give 3 sh*ts who he gives advice to, he has:

1) a very good track record of success in investing.

2) a record of making money without ever doing anything unethical

3) obviously a well-intentioned person - rare to find among multi-billionaires

Whether you agree with everything Mr. Buffett has done or said over the years, know this - he has made very few wrong calls in the financial world.