Investment Guru Warren Buffett Says US Downgrade ‘Doesn’t Make Sense’

[Hissyspit]

Source: AFP

Investment guru Warren Buffett says US downgrade ‘doesn’t make sense’
Published on August 7th, 2011
Written by: Agence France-Presse

Investing guru Warren Buffett criticized the Standard & Poor’s downgrade of the long-term US credit rating, saying it “doesn’t make sense” and would have a limited impact on markets.

“I don’t get it,” the highly-respected founder and chairman of Berkshire Hathaway told Fox Business News late Friday, saying his Omaha, Nebraska-based company would hold onto its considerable trove of US Treasury bills.

- snip -

The billionaire investment wizard brushed off fears that the downgrade will roil world markets.

“If nothing else takes place, meaning, if all other variables hold and there isn’t say, a new problem in Europe, it won’t make any difference,” he said, referring to the growing eurozone debt crisis.

Read more: http://www.rawstory.com/rs/2011/08/07/investment-guru-warren-buffett-says-us-downgrade-doesnt-make-sense/

[area51]

1. It does make sense

if you realize the U.S. is in a downward spiral with just one of our problems 30½% unemployment. We're never going to get our debt under control until we stop multiple wars of choice, put the MIC on a diet, and start investing in people and infrastructure.

[SleeplessinSoCal]

2. I makes sense only when you understand the politics of the matter.

Where were these guys 04-08 when were were bleeding money?

http://www.thedailybeast.com/articles/2011/08/05/economic-meltdown-villain-george-w-bush-s-staggering-debt-numbers.html

[Igel]

28. They were being praised for allowing a lot of mortgages to be issued.

They were giving high ratings to risky bonds. People don't like to remember that before there was a problem, when the problem was in gestation, the perceived pregnancy (so to speak) wasn't so much ignored as deemed a grand and glorious thing. Then it turned out the fetus was actually an alien in gestation, and there was no Sigourney Weaver around to keep it in check. Just a rancher with no cattle and a university professor with no scholarship.

Then in 2008/09 they were criticized for giving high ratings to shoddy, risky bonds. They were told to be more stringent in applying their standards and not just give ratings based on short-term profitability or how societally useful they were (depending on which side of the political Great Wall you're on). In other words, they must consider risks more than they had been doing.

Now they're being conservative and making conservative assumptions to limit risk, the people that said they were being risky before call upon them to stop being less risky.

[girl gone mad]

3. Everybody thinks this will force the government to "behave better".

Those on the left want to believe that the government will have to draw down from overseas military operations and raise taxes on the rich.

Those on the right think we will have to cut wasteful spending and stop subsidizing housing, education and healthcare for the poor.

In reality, the entrenched oligarchical interests will continue to reap the benefits of our fiat currency while the productive classes are forced to endure austerity. Under these circumstances, there will be no recovery.

[tavalon]

4. correct

[blkmusclmachine]

5. +1

:hide:

[banned from Kos]

14. "Fiat" money? You're a goldbug too? What is going on here?

Surprised at all the goldbug Ron Paul fans here.

[BadtotheboneBob]

15. Actually, I like silver...

I started last October and while the amount is still small (yet growing monthly) the value I've invested has appreciated 33.5% overall. Had I put the same amount of 'cash' into a CD or statement savings account, the amount of interest I would have made from any evil bank (actually, they're all evil) would have been a pittance. This investment is intended for my 4 year old grand-daughter. And Ron Paul has nothing to do with it.

[banned from Kos]

16. That's different - you're not proposing a silver standard to back our

dollar up. I like silver too since it has far more practical use than gold does.


But when one uses the term "fiat currency" they typically are lobbying for a commodity based currency. Democrats and populists fought hard to rid ourselves of such for 50 years via the Greenback Party.

"The party opposed the shift from paper money back to a bullion coin-based monetary system because it believed that privately owned banks and corporations would then reacquire the power to define the value of products and labor. It also condemned the use of militias and private police against union strikes.<3> Conversely, they believed that government control of the monetary system would allow it to keep more currency in circulation, as it had in the war. This would better foster business and assist farmers by raising prices and making debts easier to pay. It was established as a political party whose members were primarily farmers financially hurt by the Panic of 1873" (Wiki)

Today, the Fed determines the value of money - NOT those that own the gold.

[BadtotheboneBob]

22. Ah, I see...

No offense intended to you...

[Yavin4]

29. Same Here.

I too have started buying Gold and Silver, and I've already made more than what I did for the last year in my savings.

Since 1981, the government has been borrowing trillions of dollars, and spending it on tax cuts for the wealthy and defense. In sum, we've borrowed and spent on non-productive items. Another example is healthcare. Medicare costs are skyrocketing because we have not moved to a single payer system wherein the government negotiates prices for health care services and pharmaceuticals. As a result, healthcare costs rise faster than inflation, and we have to borrow to match the costs.

There's not nearly enough growth in the U.S. economy to even begin paying back all of this debt.

[PoliticAverse]

19. 'fiat money' is the correct term, it has nothing to do with gold...

except for the implication that it isn't convertible into gold.

http://www.merriam-webster.com/dictionary/fiat+money?show=0&t=1312726798
http://en.wikipedia.org/wiki/Fiat_money

[banned from Kos]

21. I know its correct but there is no alternative other than a

commodity backed currency or a "basket" of other currencies/commodities - both of which are horrible ideas for the US.

Goldbugs roll out the "fiat" term as criticism of the dollar.

[girl gone mad]

30. I believe everyone should benefit from our monetary system..

not just the kleptocrats.

http://michael-hudson.com/2011/06/how-a-13-trillion-cover-story-was-written

Free money creation to bail out America’s elite financial speculators, but not for Social Security or Medicare

What has made the post-2008 crash most remarkable is not merely the delusion that the way to get rich is by debt leverage (unless you are a banker, that is). Most unique is the crash’s aftermath. This time around the bad debts have not been wiped off the books. There have indeed been the usual bankruptcies – but the bad lenders and speculators are being saved from loss by the government intervening to issue Treasury bonds to pay them off out of future tax revenues or new money creation. The Obama Administration’s Wall Street managers have kept the debt overhead in place – toxic mortgage debt, junk bonds, and most seriously, the novel web of collateralized debt obligations (CDO), credit default swaps (almost monopolized by A.I.G.) and kindred financial derivatives of a basically mathematical character that have developed in the 1990s and early 2000s.

These computerized casino cross-bets among the world’s leading financial institutions are the largest problem. Instead of this network of reciprocal claims being let go, they have been taken onto the government’s own balance sheet. This has occurred not only in the United States but even more disastrously in Ireland, shifting the obligation to pay – on what were basically gambles rather than loans – from the financial institutions that had lost on these bets (fraudulently inflated loans) onto the government (“taxpayers”).

The government took over the mortgage lending guarantors Fannie Mae and Freddie Mac (privatizing the profits, “socializing” the losses) for $5.3 trillion – almost as much as the entire national debt. The Treasury lent $700 billion under the Troubled Asset Relief Plan (TARP) to Wall Street’s largest banks and brokerage houses. The latter re-incorporated themselves as “banks” to get Federal Reserve handouts and access to the Fed’s $2 trillion in “cash for trash” swaps crediting Wall Street with Fed deposits for otherwise “illiquid” loans and securities (the euphemism for toxic, fraudulent or otherwise insolvent and unmarketable debt instruments) – at “cost” based on full mark-to-model fictitious valuations.

Altogether, the post-2008 crash saw some $13 trillion in such obligations transferred onto the government’s balance sheet from high finance, euphemized as “the private sector” as if it were the core economy itself, rather than its calcifying shell. Instead of losing on their bad bets, bad loans, toxic mortgages and outright fraudulent claims, the financial institutions cleaned up, at public expense. They collected enough to create a new century’s power elite to lord it over “taxpayers” in industry, agriculture and commerce who will be charged to pay off this debt.

If there was a silver lining to all this, it has been to demonstrate that if the Treasury and Federal Reserve can create $13 trillion of public obligations – money – electronically on computer keyboards, there really is no Social Security problem at all, no Medicare shortfall, no inability of the American government to rebuild the nation’s infrastructure. The bailout of Wall Street showed how central banks can create money, as Modern Money Theory (MMT) explains. But rather than explaining how this phenomenon worked, the bailout was rammed through Congress under emergency conditions. Bankers threatened economic Armageddon if the government did not create the credit to save them from taking losses.

[elleng]

23. It makes sense to me ONLY

because of S+P's recognition of repugs intransigence + McConnel's pledge that 'this will continue.' Nothing inherent, imo.

Of course, S+P contributed mightily to current state of affairs.

[goforit]

6. Money grows on trees for Warren

[madrchsod]

7. warren..the fix is in ..did`t your friends warn you?

[goforit]

8. No taxes for rich = crash in markets. TA DAH

[JJW]

9. Why didn't the criminals at S&P.....

Why didn't the criminals of S&P downgrade when either the too-big-to-fail banks and world economies had failed or when Mr. O had extended Bush tax cuts? They also could have done it, when the Gov failed to pass meaningful health care reform as this is the main driving force in US debt.

It seems at little too obvious that the criminals are going after SS, Medicare, and Medicaid all to make US workers into the world's cheapest slaves.

It's perks, bonuses, tax cuts, and subsidies for Wall Street and austerity for thee.

[JDPriestly]

24. Because the S&P is run by Harold McGraw, III

who is a Blue-Dog Republican Conservative, not a liberal.

Harold McGraw III and the S&P have a definite political agenda.

http://www.newsmeat.com/fec/bystate_detail.php?last=McGraw&first=Harold

Here is a list of Harold McGraw III's political donations. Landrieu, Lieberman, Gillibrand, Dodd, Rangel and now Romney. Those are the financially conservative types that the S&P supports. None of them are really concerned about the fare of ordinary working Americans.

The S&P rating is pure politics -- more Blue Dog Democrat, middle-of-the-road Republican propaganda.

Numbers can be twisted any way you want to twist them.

[florida08]

10. no it doesn't but then again

they were giving toxic assets triple A so they have little credibility. Their board directors has a vested interest.

http://zunguzungu.wordpress.com/2011/08/06/reading-about-the-credit-downgrade/

Why S&P has no business downgrading the US

[florida08]

11. S&P warns of a second downgrade

http://www.politico.com/news/stories/0811/60803.html

[goforit]

20. Bush 1 and Bush2 and Clinton and Qbama and Congress, ALL

get to see their own handy work in DESTROYING AMERICA,

[wordpix]

26. well at least Congress gets pensions for life, no matter what hours they work each week

:grr:

[florida08]

31. yeah..time to bring back street stockades

:-(

[blank space]

12. warren owns a massive quantity of T Bills-

warren says t bills are good.

Hmmmmm.

[banned from Kos]

13. Buffett is not interested in the measly 2-3% return on Treasuries

almost all of Buffett's wealth is in Berkshire stock.

[PoliticAverse]

17. Buffett's Berkshire owns ~12% of Moodys, which is threatening to downgrade the US in the future...

http://warren-buffett-portfolio.com/

[No Elephants]

18. If the world had started on August 1, 2011, I suppose one could

make a great argument in favor of the downgrade and also make a great argument against the downgrade.

But the world did not start on August 1. Neither did American's debt. So, I sgree with the OP article that something is questionable.

We've been trillions in debt for a long time. Why did S & P downgrade only after an austerity bill was passed? Doesn't add up (and I don't mean only the $2 trillion miscalculation).

[JDPriestly]

25. Since you ask why downgrade now?

Because Harold McGraw III who runs McGraw-Hill which owns the S&P hires people and supports candidates who favor a certain political direction.

Look at his list of political donations. Blue Dog Democrats and business-oriented Republicans. The usual bunch who put jobs and ordinary people last.

http://www.newsmeat.com/fec/bystate_detail.php?last=McGraw&first=Harold

[go west young man]

27. Thanks for this info.