What Would Warren Do?

Warren Buffett is sometimes called the Oracle of Omaha. He was born and still lives in Omaha, NE. He graduated from the University of Nebraska-Lincoln where he earned a degree in economics.


I, too, attended UNL and have a degree in economics. I one-upped Warren, however. I was in the University of Nebraska Cornhusker marching band, where I played the sousaphone and marched in two Orange Bowl parades. The Huskers won back-to-back national football championships in those years.

Warren on the other hand (side by side with pal & bridge partner, Bill Gates) are the two richest people in the world. Warren one-upped me there!! Ha.

Recently in the New York Times, Mr. Buffett warned of the dangers of the U. S. government taking on too much debt. Doing so could lead to hyperinflation and a devaluation of the American dollar that could transform the United States into a banana republic economy.

Unchecked greenback emissions, he says, will certainly cause the purchasing power of currency to melt.

The U.S. economy appears to be on a slow path to recovery but enormous dosages of monetary medicine continue to be administered, creating an annual deficit more than twice any since 1920 aside from war-impacted years of 1942-46.

Congress, Buffett says, must end the rise in the debt-to-GDP ratio and bring U.S. growth in obligations back in line with U.S. growth in resources.

With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.

In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort:

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

We don’t want our country to evolve into the banana-republic economy described by Keynes.

Mr. Buffett is a key economic advisor to President Barrack Obama. Some have credited his endorsement of candidate Obama last summer with giving the former Illinois senator the credibility he lacked on economic issues. Warren has said, you couldn't have anybody better in charge of the economy.

He enthusiastically endorsed Mr. Obama's stimulus package in February and as recently as last month was calling for a second round of stimulus spending.

Now to help you fairly evaluate points of view, I invite you to watch a counter-point video from Peter Schiff, a regular on CNBC & FBN business cable channels.