Posted on 02/22/2010 1:13:43 PM PST by cycle of discernment
Buffett's Partner: 'It's Over' for U.S. Economy
Monday, 22 Feb 2010 11:42 AM By: Dan Weil
Charlie Munger, Warren Buffett’s longtime business partner in Berkshire Hathaway, warns in a new column that the U.S. economic empire is crumbling before our eyes, thanks to federal debt and poor planning.
In an article penned for Slate.com, Munger uses the form of a parable to explain how Wall Street’s love affair with gambling has destroyed America’s Main Street.
The article leads with this headline: “Basically, It’s Over.”
The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match U.S. history.
Early in its history, debt is unknown except for home mortgages and some consumer loans, and people live within their means. Speculation is discouraged, and commodities markets are small and tightly regulated.
Under this rational system, economic growth skips merrily along at a steady 3 percent, Munger explains.
Taxes are limited and pay for only “essential services” like fire protection, courts, and defense. Most taxes are collected on imports, and government spending matches that tax income. Debt via government bonds is limited.
Then things take a turn for the worse.
“The extreme prosperity of Basicland had created a peculiar outcome: As their affluence and leisure time grew, Basicland's citizens more and more whiled away their time in the excitement of casino gambling,” Munger writes.
Financial services soon grow to account for too big a portion of the economy, Munger says.
“The winnings of the casinos eventually amounted to 25 percent of Basicland's GDP, while 22 percent of all employee earnings in Basicland were paid to persons employed by the casinos, many of whom were engineers needed elsewhere.”
Then, a shock: Imported energy costs rise, and low-cost labor competition from abroad appears, Munger writes.
“Suddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors,” Munger writes.
The U.S. deficit — just the gap between spending and income in one year — is projected to hit $1.6 trillion in 2010. Total debt is project to exceed 100 percent of GDP starting in 2011.
In the parable, Munger strongly suggests that the United States take seriously the campaign of Reagan-era Fed Chairman Paul Volcker, who wants the big banks to cease pretending to be banks if they expect the freedom to trade securities on the side.
“He suggested that Basicland should strongly discourage casino gambling, partly through a complete ban on the trading in financial derivatives, and it should encourage former casino employees — and former casino patrons — to produce and sell items that foreigners were willing to buy,” Munger writes.
As the parable ends, none of the politicians listen, and Basicland turned into “Sorrowland,” Munger concludes.
Buffett makes it official the left and Soros have been victorious destroying the economy!
Let’s see, spend more than you take in is a problem.
For all you financial people out there...what is going to happen when almost every country goes broke?
How do we get out of this mess, not just us but most of the whole world.
Buffet (and his partner) lean left themselves. Slate magazine is a liberal rag. The article pointedly omits that the GOVERNMENT needs to stop spending & borrowing, and instead points it’s finger at the financial sector. The place described is more like “Fantasyland”, or “Liberaland”.
Somehow, I don’t think you can blame Soros for everything. Or even “the left” for that matter. The last few Republican presidents have a lousy record on government spending.
I shy away from Newsmax products, which this is.
Munger, his partner of 40 years, makes it official. Buffett, the idiot savant, backed Obama all the way.
They are realizing billionairs are not allowed in a Communist State. I wonder when the Trial Lawyers will figure out they are not needed in Communism.
The big ticket items were passed and put on autopilot by leftwingers.
Buffett is a stinking lefty who loves Obama. I have no idea why Munger still does business with him.
Could have something to do with the asshat Buffet supported for POTUS.
It is hard to figure out who is the more evil between the government and some parts of the financial industry, both need to be reigned in.
...so a bunch of Wall Street Billionaire libs are blaming Wall Street types (themselves excluded) for our economic woes.
Why are we going down the crapper? Because the very people responsible for this (the left) have run the system in to the ground and now blaming strawmen.
Sucks that they’re going to get away with it. :(
“Then, a shock: Imported energy costs rise, and low-cost labor competition from abroad appears, Munger writes.”
Munger’s stinking filthy pla Buffett supports Omaba and Saudis destroying us.
We have the energy here to be the wealthiest country in the world. People are so stupid in this country.
“Buffet (and his partner) lean left themselves.”
It certainly doesn’t help to have Buffett hop on the bandwagon to tax the rich more. Part of the reason spending is out of control is that progressives imagine that all we need to do is increase taxes on the rich and all our financial woes will melt away.
Hell the last few Republican Presidents combined don't equal what obama has done in a year!
Out of every $100 produced by Americans, the government takes away $45.
And he thinks the biggest problem in Basicland is proprietary trading operations by banks?
Oh, like automobiles? Ooops. Outsourced.
Like cell phones? Ooops, Outsourced.
Like Computers, circuit boards, resistors, transistors, harddrives, read-write heads, LCD's, and flat screens (ALL invented here...) ? OOOOOPS. Outsourced.
Like IPhones, IPods, MP3 players, and other smartphones? Ooops...outsourced.
Like Jumbo jets and jet engines? Ooooops, outsourced.
And soon... space boosters to orbit and beyond... outsourced to Russia???
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