Buffett warns US on deficit

INVESTMENT guru Warren Buffett has warned the US government over its $1.8 trillion (&pound;1.1 trillion) budget deficit, which he said could lead to inflation and damage the dollar&rsquo;s purchasing power.<br /><br />Buffett has raised fears politicians will shirk from cutting government spending or raising taxes. He suspects they will instead quietly let inflation creep up, turning the US into a &ldquo;banana republic economy&rdquo; that would &ldquo;confiscate wealth&rdquo;.<br /><br />He said while the US is now &ldquo;out of the emergency room&rdquo; in terms of the financial crisis, the massive monetary programmes still being administered may pose a serious threat.<br /><br />Buffett, the world&rsquo;s second-richest man who runs investment giant Berkshire Hathaway, described these &ldquo;greenback emissions&rdquo; of money into the economy as posing a long-term risk as serious as greenhouse emissions.<br /><br />&ldquo;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,&rdquo; he said.<br /><br />Last month the US government reported a $181bn budget deficit &ndash; only the third time in the last 30 years it booked a deficit for an eleventh consecutive month.