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Warren Buffett Weighs In On America’s Debt Crisis & Threat Of Currency Crisis

21 August 2009 No Comment

Warren Buffett is seemingly the expert on anything financial / economy related to all Americans.  His track record obviously supports his credibility.  In recent times, Buffett has explained some opinions that I personally did not completely agree with, but in his latest Op-Ed in the NYT, Buffett warns America about the mountain of debt that we find ourselves under.  This piece I find myself in complete agreement with.

A few key quotes of the article:

To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

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.”

These quotes both state the severity in which we find our country’s fiscal state and the scary path that our politicians continue to take us down.

It’s really hard to imagine how inflation (lots of it) is not in our future.  Do you agree?  If so, are you buying gold?  Check out the 20smoney gold investing site.

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