Warren Buffet warns budget deficit harms dollar

Warren Buffett warns budget deficit may harm dollar
Warren Buffett has given warning that the US’s $1.8 trillion (£1.1 trillion) budget deficit could harm the purchasing power of the dollar, even though he admits the American economy “appears to be on a slow path to recovery”.


By James Quinn, US Business Editor
Published: 8:07PM BST 19 Aug 2009
Warren Buffett admitted that the American economy
Warren Buffett admitted that the American economy "appears to be on a slow path to recovery"

Mr Buffett, the world’s second-richest man and famed for his ability to make astute investments, believes that the “gusher of federal money” flowing in to the US economy could eventually fuel inflation and devalue the greenback.

In a comment piece in yesterday’s New York Times, Mr Buffett said that while he “resoundingly applauds” the efforts the Federal Reserve and both the Bush and Obama administrations have made to support the US economy, it does not come without a price.

Writing that the “US economy is now out of the emergency room,” he continues: “Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects.”

“For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

Mr Buffett likened the threat of what he called “greenback emissions” to that of greenhouse emissions, before urging members of the US Congress to work to reduce the budget deficit by making changes to taxes and spending.

His comments were made as the Pacific Investment Management Company (PIMCO), warned that the dollar’s status as the world’s reserve currency will undoubtedly come to an end.

Curtis Mewbourne, PIMCO’s portfolio manager said in a report that “ we are clearly seeing a loss of status for the US dollar as a store of value”.