Busted: Bankers and The Global Economy

May 3, 2009

Inflation and Devaluation Looms on Horizon

warren_buffettMany of you haven’t been willing to believe me. Inflation despite the current troubled economy is still a very real concern. Why? Continually pumping dollars into the failed financial system is spreading the dollar very thin indeed. The bailout is likely to have “unintended consequences”. So says the blue boy of the financial market and Berkshire Hathaway chief Warren Buffett.

Buffett says that officials should be judged leniently since the economy was facing “as close to a total meltdown as you can imagine.” If you read this blog, you know what the meltdown was caused by: unchecked banking innovation and greed.

In the eyes of Buffet, the runaway debt spending must be paid for sooner or later (no force majeure?). Political leaders show little inclination to raise taxes, at least in an upfront way. Buffett indicates that one sure way to pay for excess spending is to “inflate the value” of the currency. The biggest losers in a surge of inflation, he added, would include holders of bonds and other fixed-income assets. “I haven’t had my taxes raised. My guess is the ultimate price will be paid by a shrinkage of the value of the dollar.” Duh. ~ E. Manning

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