by: Ethan

Mon, 03 Nov 2008 15:13:43 +0000

It is the author, not Buffet that doesn’t understand the situation. The underlying assumption is that foreigners have a “willingness” to accept USD and that this “willingness” will go on indefinitely. Is this really the case? As the world is flushed with dollars, its value drops - we’ve seen strong evidence of this in the past decade. As dollars’ value drop, foreigners “willingness” to invest in dollar denominated instruments will also fall. I’ve worked in China for the past 7 years, and let me tell you that enthusiasm in dollar denominated investments has decreased dramatically. If enthusiasm for the dollar drops, then where how would Treasury issue more dollars to fund its debt? In the past 37 years, the Treasury was able to keep this unhealthy situation from collapsing because of foreign enthusiasm. Given political-economical climate change, this enthusiasm is not guaranteed and if the falling dollar tells us anything, it is indeed weakening. Sure, the Treasury can just keep “printing money” to pay debt, but without enthusiasm for the dollar from foreign parties, this will need to rampant unsustainable inflation - which is a deep concern because of globalization. Use some common sense, anybody with a half a brain would smell something fishy about being able to continually borrow money without ever having to pay it back…just because the US was able to maintain this situation because of “enthusiasm” in dollar investments in the past doesn’t mean it can (and in my opinion, it definitely will not be able to) in the future! Warren Buffet knows what he is talking about…

Comments on: Warren Buffett Fears Foreign Ownership …

by: Ethan