Warren Buffett needs to retire and enjoy his old age as a billionaire.\u00a0\u00a0 His reaction to the S&P downgrading is that it was stupid – that if it were up to him, he would create a AAAA rating for the U.S.<\/p>\n
Buffett made his money primarily in the insurance business.\u00a0\u00a0 His view is that the US Government doesn’t have any “debt” that isn’t in dollars, and the Fed\/Treasury can always just print more dollars to pay the existing debt, so there is no chance the US can’t pay its interest.<\/p>\n
The dollar itself is a debt.\u00a0\u00a0 It’s a promise that at some point in the future, you can give someone your dollar and they will give you something of equal value in return.<\/p>\n
There is more to the world’s economy than insurance products and derivative index products.\u00a0\u00a0\u00a0 We have this thing called the Current Account – which is the net amount of dollars that are flowing into and out of the United States for a variety of reasons.\u00a0\u00a0 As the Federal Reserve prints more and more money, foreigners have to decide if they want to accept dollars in payment.\u00a0\u00a0 The more dollars there are and the more people believe the US dollar\u00a0will lose value (inflation), the less they want dollars and\/or will\u00a0convert them into something whose value isn’t dependent on the value of dollars.\u00a0 (ie Gold)<\/p>\n
The last time the United States had a surplus was in 1981, which just so happens to be when Ronald Reagan became President: We’re running around a 1\/2 $trillion deficit in our trade.\u00a0\u00a0 Foreigners aae not buying our US Treasury instruments – they know they have no long term future.\u00a0\u00a0 They may have no default risk, but they have a huge foreign exchange risk.\u00a0 They know the Federal Reserve is keeping the interest rates artificially low, and at some point when they stop, anyone holding US Notes and Bonds will be socked big time – since interest rates and bond prices move in opposite directions.<\/p>\n \u00a0 The dollars we are shipping abroad are turning around and buying up our country.\u00a0\u00a0 There is a pretty good chance the supermarket you shop at is owned by a European company.\u00a0\u00a0 There is a good chance the gasoline station you buy gas at is owned by another country.\u00a0\u00a0 The toll road you drive on is probably has been sold to\u00a0another country.\u00a0\u00a0 The parking meters in your downtown are probably owned by another country.\u00a0\u00a0 The radio and TV stations you watch are probably owned by\u00a0investors in another country.\u00a0\u00a0 The music you listen to is owned by companies in another country.\u00a0\u00a0 Your bank may be a branch of a bank from another country.\u00a0\u00a0\u00a0\u00a0 The big chain restautant you eat at is probably owned by a Private Equity fund using money it borrowed from another country.\u00a0<\/p>\n Money from China is paying Americans to strip copper out of buildings to ship it to China to build new cities.\u00a0\u00a0 The main export from America is tearing down our buildings and factories and putting the scrap metal on boats to Asia.\u00a0\u00a0 Our economy is being devoured from the inside out.\u00a0<\/p>\n The final end game is when China, OPEC and Europe say “Enough is Enough” and no longer accept or price crude oil in US Dollars.\u00a0\u00a0 The spread between West Texas and Brent Crude is over $20 a barrel – that’s partly the situation in Libya and partly the nature of the two types of oil, but to a large degree it is pointing to the Europeans not wanting to sell\u00a0their oil\u00a0for dollars.<\/p>\n Should the\u00a0monarchy in Saudi Arabia propped up for decades by the United States suddenly be overthrown (we do believe in Democracy right?), the game is over.<\/p>\n","protected":false},"excerpt":{"rendered":" Warren Buffett needs to retire and enjoy his old age as a billionaire.\u00a0\u00a0 His reaction to the S&P downgrading is that it was stupid – that if it were up to him, he would create a AAAA rating for the … Continue reading
\nhttp:\/\/www.bea.gov\/newsreleases\/international\/transactions\/transnewsrelease.htm<\/a><\/p>\n