Monday, March 20, 2006

Buffett Is Right Again but as Usual It's For the Wrong Reasons

Warren Buffett has the knack of hitting the head with the nail.

[Thanks to for the image.]

He says, "I think over time the dollar is going to weaken. I have no idea whether it will be this year or five years from now, but I think that we are following policy that will cause the dollar to weaken over time."

I couldn't agree more. But then he goes on to say:

"It's the consumer's action in the end that is doing it but we have no governmental policy that counters the fact we are sending a couple of billion dollars a day abroad. We are trading - we are buying goods and we are selling capital."

So he's got the right outcome, but for the wrong reason.

What would he have the government do? Surely not stop inflating the dollar. No, he'd rather they slap on some tariffs to stop imports. Or maybe he'd rather see restrictions on foreign investments in the US. Or what about forbidding outsourcing, to "maintain American jobs?"

Perhaps he'd like China to allow the dollar to drop (I'm guessing he's heavily invested in Chinese real estate.) Whatever Mr. Buffett advocates, he is looking out mainly for himself and his investors -- which is what he should be doing, by the way. The fact that he may be right doesn't mean he sees the larger picture showing the defective inflationary policies of this Federal Reserve, administration and legislature.

See the Reuters article here.


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