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.
All by design...to bring you into your new serfdom with your new world government. After a few weeks of not eating, you’ll be glad to be a slave for soup floating with rat droppings...
“Out of every $100 produced by Americans, the government takes away $45.”
You pay 45%?
Buffet is a Dem and supported Obama. Munger is not a Dem and has consistently supported Republicans, including McCain in the last election. Wish Munger could have talked some sense into his partner.
The U.S. MUST re-value the dollar 1 for 10 or more, and MUST be the first, return to gold and silver with 100% backing for paper money, at first.
Mostly it’s over for Charlie Munger, who is 86.
Mortality comes to all.
Hugo Chavez made his pals into rich Oligarchs and he’s been throwing them in prison now.
Most cars sold in this country are manufactured here.
zer0 will devalue the dollar, big time and soon. inflation will roar. It will be very sad, homeless camps, crime, and it won’t be like the 30s nope, a lot of the population is on drugs, legal or not they are on them, they will want their fix.
Actually not that hard. A year of jubilee. All debts cancelled.
China won’t like it though.
45% is the share of US GDP that government spends
Agree!
Then republicans have to stop drifting and reverse course the next time they return to power.
Original Slate article.
http://www.slate.com/id/2245328/pagenum/all/
So in Basicland, the government doesn’t interfere in the economy or tax it too much? Or is that Fantasyland?
Eisenhower added to social security. Bush added a drug benefit to medicare. Bound to be other examples. Even if we refrain from adding on to Democrat programs, we still need to take the government off of autopilot because the ship of state is headed for a crash.
Hey Charlie, your stupidass buddy supports the evil scum that are doing all this damage.
The government is much more powerful. That's where you start.
Exactly. And it fails to mention that much of the housing bubble was due to government requirements to lend to people who couldn't repay their housing loans. It's extreme Lefty BS.
No! He makes it official that Republicans and the Right don’t have a clue as to what is going on. Sleeping with Libertarians has left the GOP, well let’s call it what it is, FRIGGIN’ BRAIN DEAD on economic stuff.
All your typical Republican can do today is wallow around like some kind of chimpanzee on economic issues making hoots, howling occasionally, and shaking branches around. (I am perhaps being too charitable.)
Wall Street (WS)has sunk the country. Obama has not risen to the occasion having been courted and wooed by WS, and having as economic advisors some of WS’s finest. Obama has been seduced by Wall Street and it is so bad, even the progressives on the lefty side of things are puking and having DT’s.
Do the Republicans rush in and save the day? Do they finally re-regulate the sorry b*stards? OH H*LL NO! They are too busy repeating libertarian-Ayn Rand garbage like “free market” and “no regulation”. Cause you see, they don’t get it yet. It was the the free, unregulated-ish markets which did this.
Our Founding Fathers had a brief experience with weak and puny government that could not perform its limited job effectively. They called it the Articles of Confederation. It was so week that it didn’t work, and being realists, they knew they had to have a government that could perform the functions needed. NOT PRACTICALLY NO GOV’T AS PREACHED BY THE GOP PRIMATES.
The GOP has the golden opportunity here to do the right thing AND come back into power for the right reasons (instead of as a reaction to Obama) and what do they do???
They sit in their little monkey cages, wash down bananas with stale Libertarian Tea, and preen thru each other’s fur searching for various lice, fleas, and ticks. This instead of recapturing America’s center and the independents, and the p*ssed off Democrats.
parsy, who wishes you all would read up some on this stuff
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