Buffett warns US on deficit
INVESTMENT guru Warren Buffett has warned the US government over its $1.8 trillion (£1.1 trillion) budget deficit, which he said could lead to inflation and damage the dollar’s purchasing power.
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 “banana republic economy” that would “confiscate wealth”.
He said while the US is now “out of the emergency room” in terms of the financial crisis, the massive monetary programmes still being administered may pose a serious threat.
Buffett, the world’s second-richest man who runs investment giant Berkshire Hathaway, described these “greenback emissions” of money into the economy as posing a long-term risk as serious as greenhouse emissions.
“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,” he said.
Last month the US government reported a $181bn budget deficit – only the third time in the last 30 years it booked a deficit for an eleventh consecutive month.