The Oracle of Omaha is at it again! He is raising concerns on the ways of the US economy… and how the economy could be headed for disaster… not just here.. but around the world! I think what I found intriguing was the point on “Political Turmoil”! Wonder what he meant about that!
The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to “political turmoil,” billionaire investor Warren Buffett has warned.
“Right now, the rest of the world owns $3 trillion US more of us than we own of them,” Buffett told business students and faculty at the University of Nevada in Reno.
“In my view, it will create political turmoil at some point. Pretty soon, I think there will be a big adjustment,” he said without elaborating.
He goes on to give figures on how much the figure is galloping in the past few years! The example is that of a “Texas ranch” with obvious implications of the policies of George Bush… and how just because one is large doesnt mean that chipping away on the resources will last forever!
The U.S. trade deficit for the first 11 months of 2005 totalled $661.8 billion US, surpassing the previous annual record of $617.6 billion US set in 2004. Economists say when December figures are included, the final deficit for 2005 will top $710 billion US. Buffett said he expects it to top $700 billion US this year.
“That’s $2 billion US a day. We are like a super rich family that owns a farm the size of Texas. You sell off a little bit of the farm and you don’t see it,” he said.
In the end, comes the warning regarding the trade relationship that he perceives as the main culprit – the trade deficit with China! The deficit is on trend to reach USD 15 trillion if the flow is not reversed… now THATS a level of debt that could last generations to pay!
Fifteen years ago, the U.S. had no trade deficit with China, he said. “Now it’s $200 billion. If we don’t change the course, the rest of the world could own $15 trillion of us. That’s pretty substantial. That’s equal to the value of all American stock,” Buffett said.
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