Thursday, August 20, 2009

Buffett says unchecked U.S. debt threatens economy:



WASHINGTON (Reuters) "The United States economy is now out of the emergency room and appears to be on a slow path to recovery," Buffett wrote.

"But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself."

Buffett said a revived economy will not be able to generate enough revenues to bridge the gap between outlays and receipts, so changes in taxes and spending will be required.

Politicians will not likely have the will to raise taxes or slow spending, so they may opt to quietly let inflation increase, a move that will "confiscate" wealth and allow the United States to evolve into a "banana republic economy", he said.

"Our immediate problem is to get our country back on its feet and flourishing -- 'whatever it takes' still makes sense," Buffet said in the paper.

But once recovery is gained, Congress must end the rise in the debt-to-GDP ratio and keep its growth in obligations in line with its growth in resources, he wrote.

"Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress," he said. FULL STORY

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