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.
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
I would have asked that question differently. You're only paying 45%? Many of us are paying even more. For 2010, I'm looking at Fed 28%, State 7.8%, FICA 7.65%, Medicare 1.45%. That's 44.9% before getting nicked for sales tax, property tax, fuel tax, vehicle registration, etc.
When the Bush tax cuts expire, add 3% to that number for 2011.
Get ready for the eartho.
They supported Obama because is a fascist . They are pure business , and just like a shark is a pure predator they are both natural and vital . The weak kneed repugnican traitors we have elected , supposedly to provide balance and sanity , are the problem . Maybe they were all misled like McCain .
This is nothing but nonsense. The CRA ain’t the reason why we have problems. PLEASE do me a favor. Go to a website called nakedcapitalism.com and read up on the meltdown from people who work on Wall Street. The ones who actually have a conscience. You won’t find them repeating the Republican Bed Time Story about the poor widdle bankers who got in the Evil Witch’s Candy House and were forced to make bad loans.
And if I sound intense, well its because I am. This excuse is not just off—it’s like 180 degrees off. It’s like inter-dimensional off. The looters NEEDED bad loans. So they could sell them and then bet against them.
parsy, who can’t believe the GOP still don’t get it
Time for a clean sweep in November if it lasts that long.
I agree... the smell of the left is strong with his post.
LLS
And all of these parable points are addressed in the most inspired and brilliant legislation of H.R. 25, a work that is worthy of of praise from America’s own Founders and Framers.
These asshole know what the economy is going to do well before it happens. Why you ask? Because they (and the rest of the globalist financial oligarchy) are the root cause.
Yes, even that fat bitch Opra is in on it.
The GOP let spending get out of hand and payed for it back in 2006. This is 2010 and they've learned their lesson. I keep reading where they have no spine and are just a bunch of RINO's but I don't see any evidence to support this. In fact I'm proud of what the GOP has done in the face of the Rat's near tyranny!
Yes...I’m getting more than a little tired of all the GOP bashing going on around here. I’m smelling rat plants all over the place.
you could add the entire Non-Profit Governmental complex and all its subsidiaries./rant
I suppose that the best response to Obama’s latest health care attack is to dismiss it point blank and talk about jobs, particularly the “jobs” angle of cap and tax, healthcare, and stimulus. Do what Obama isn’t doing while Obama leads his party off a cliff. But folks here would not be worried about RINOs if they didn’t pose a danger to the GOP and the country.
Buffon Buffet endorsed obama.
I don’t have any beef with keeping an eye out for RINO’s...it’s when people start calling all Republicans RINOs and start saying that there’s no difference between the rats and the GOP that I get my hackles up.
“...After a few weeks of not eating, you’ll be glad to be a slave for soup floating with rat droppings...”
As someone once said: “At any given time civilization is only nine meals away from anarchy.”
“the government takes away $45.”
Seems like quite a bit of the 45 went to GS and other types of Banks.
I only made it that far.
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