Thursday, June 26, 2008

who do you think talks the most sense, the wealthy guy or idiot in fed?

Buffett vs. Bernanke: The inflation showdown

Buffett, the billionaire investor behind Berkshire Hathaway (BRKA, Fortune 500), fingered "exploding" inflation Wednesday as the biggest risk to the economy. "I think inflation is really picking up," Buffett said on CNBC. "It's huge right now, whether it's steel or oil," he continued. "We see it everywhere."

Posted by mark @ 04:19 PM (889 views)
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6 thoughts on “who do you think talks the most sense, the wealthy guy or idiot in fed?

  • i like the bit about wage earners are not asking for more money!!! If so why did all the taxi drivers go on strike in Vegas demanding permission to increase fares? for fun maybe??????

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  • Buffett rightly points to inflation as causing huge problems. The great wealth transfer is well under way and we should all prepare to get a lot poorer. What’s interesting is that Gold’s rise usually negatively correlates with the strength of the dollar: as the dollar falls, gold rises. However, although the dollar has modestly weakened today, gold has soared. This means that Buffett’s observation with respect to inflation “picking up” is not limited to dollar denominated assets, but to all goods irrespective of the currency in which they are prices. The implication of this is that ALL central banks are guilty of over-stimulating the money supply, not just the FED.

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  • Harold – if huge amounts of funds come out of property and stocks – and then go into commodities – you will get a decrease in the price of property and stocks and an increase in the price of commodities. A new bubble. Which appears to be happening in the West.

    How can you be so sure that it is the ‘over-stimulating’ of the money supply that is causing the ‘inflation’ of the prices of the goods everyone needs to live day to day? We could end up with oil and food taking most of our income and houses worth next to nothing and the money supply shrinking sharply – couldn’t we? The supply of money to buy houses has shrunk massively.

    The above is a splutter of random thoughts – for discussion… Except I’m off home now!

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  • stillthinking says:

    That is dead right. The supply of money to buy (houses or whatever) has shrunk massively which means after the inflation flare off has finished we head to deflation. King has said so himself in that inflation will fall back of its own accord, basically because people aren’t borrowing. He is trying to smooth things over and Bernanke is panicking. Does anybody really truly think that Bernanke is doing anything else apart from fighting deflation ? But magically it is somehow different here because we are still 9 months away from the US in time. No, it isn’t different here.
    What Bernanke is doing may be inequitable for society as a whole, and unfair, but the penalty of a deflationary collapse are dire. The Americans have already had people starve to death from hunger remember, they haven’t historically been loaded up on KFC.
    King, who I think is making a good although similarly unfair response, can depend on dumb Brown to cave in to the unions and increase government borrowing, so he just needs to ensure that people can pay the loans back, and so far so good. Repossessions maybe won’t go through the roof (I think they will though). Repayment to the banks is the problem -not- the value of houses.
    When people talk about the deflation in Japan they ignore the vast amounts of saved funds which are unspent, which maybe can’t be redeemed and also will certainly cause Japan to go inflationary in a hurry. The Japanese population have got 160% of borrowed GDP floating around.
    The real problem with all of this is that the people who got out at the top didn’t really because they DID NOT manage to sell their house to somebody who could actually buy it. Due to the refusal of the government to let banks fail, and tell the people to wake up pay attention, anybody who sold at the peak and is sitting on 100K profit is really sitting on 100K which is coming from the taxpayer. The pr*ck who signed the agreement is bankrupt already. So basically I am retrospectively even now putting my money into the housing profits without even getting a house !!
    Rant over. I have no intention of paying off the UK government debts to property owners so after a year or so I don’t think anybody here will be looking at houses with an eye to a bargain, they will be looking to get out, out of a food importing, energy importing, high taxation country with a indebted population and an indebted state, without even employment options. The only good thing is that the Labour voters will get hit hardest. They need to be smacked on the head with a stick and have alarm clocks glued to their ears.

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  • stillthinking says:

    I should moderate my last comment. The Japanese people also have huge foreign reserves so although they -would- get inflation they are in the lucky position of exporting their inflation instead by selling their reserves. Still they lose the foreign reserves, offloading trillions of dollars into a falling market can’t be considered a win.

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