Buffett on the Dollar: 'Our Present Over-Consumption is Unsustainable'

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 |  Includes: BRK.A, BRK.B
by: Value Watcher

Warren Buffett appeared at a fundraiser for Hillary Clinton in San Francisco Tuesday. Here are excerpts of personal notes from Nick Nejad:

Q: Your views on the US Dollar?

A: The most important question to ask in economics is "X happens, and then what?". We are living prosperously, but every day we are sending 2 Billion dollars overseas because we consume more than we purchase. It is similar to if we owned, say, a large farm in Texas. We are extremely wealthy, but every year we mortgage a little bit of that farm in order to enjoy more of the present. And it is gradual, but then at some point you have to spend an hour or maybe two hours a week of your work to go towards servicing this debt. The problem is at some point either foreign investors will stop financing our consumption, or our future generations will be burdened with debt and have to work some X hours towards servicing the debt of the earlier generation. But the present over-consumption is unsustainable.

Q: Your views on new products such as derivatives, SIVs, etc. ?

A: There's utility in securitizations. But the problem is these have become complex and the originators and investors have been stretched so far in part in the whole process.

"If you can't make money off the things you do understand, how do you expect to make money off the things you don't?"

Q: On Taxes.

A: In the U.S., 2 Trillion out of 2.5 Trillion in taxes come from income and payroll taxes. Of those, 60% is income taxes, and 40% is payroll taxes. I [Buffett] did a survey at Berkshire HQ and the average worker paid 33.2%. I paid 17.7%.

The worth of the Forbes 400 was 220 Billion in 1987, and for 2007 it is 1.5 trillion. A seven-fold increase. During the same period, wages went up only 80%.

Q: Sense for the future of our country, Warren?

A: In the 20th century, real standard of living increased seven-fold. That was unprecedented, and included the Great Depression and other scares. The American system has unleashed the greatest potential of its citizens. Back in 1790, China had 290 million people, and America had 4 million. But today look where we are at. We will be better off in the future, the real question is how it will be shared.

As always - amazing work, Nick. Thanks!