Legendary investor Warren Buffett has declared the United States economy has “fallen off a cliff” but says the downturn is an “important war which could be won”.
In a wide-ranging, three-hour television interview on CNBC (conducted from the showroom floor of a furniture company owned by Buffett’s investment company, Berkshire Hathaway) Buffett gave his views on everything from emissions trading, President Barack Obama’s response to the financial crisis, and the state of mind of the US consumer.
“People have really changed their behaviour like nothing I’ve ever seen,” he said.
“I’ve never seen the consumer or the Americans just generally more fearful than this. And they’re also confused. And you can get fearful very quickly, but you don’t get confident, you know, in five minutes.”
The widely-respected business guru has also warned of the prospect of inflation as governments around the world spend up and economies slowly recover. But governments have little choice but to act.
“We’re in a big war, and we’re going to use money to fight it,” he said.
Buffett, who has been a supporter and adviser to new US President Barack Obama, also took aim at the Republican Party’s threats to block Obama’s economic stimulus plans.
“I think that the Republicans have an obligation to regard this as an economic war and to realise you need one leader and in general support that,” Buffett said. But he also warned the Democrats and Obama not to use the economic crisis as an opportunity to “roll” the Republicans and pass contentious laws.
“In the interim, until we get this resolved, I would not be pushing a lot of things that you know are contentious.”
Buffett also hit out at the idea of a cap-and-trade emissions trading system that is being proposed by Omaba and will also be introduced in Australia. He has described the system as a “regressive tax”.
“Anything you put in that effectively taxes carbon emissions is… somebody’s going to bear the brunt of it. In the case of a regulated utility, the utility customers are going to pay for it.
“I mean, it’s going to become, in effect, a tax which we have decided is needed because the market system doesn’t really appropriately penalise something that hurts the future but doesn’t really hurt us tomorrow morning. But that tax is probably going to be pretty regressive.”