Buffett attacks American
spending junkies
Simon Bowers
Monday March 7, 2005
The Guardian
Warren Buffett, one of the world's most successful investors,
has launched his most withering attack to date on the US trade
deficit, describing Americans as "rich spending junkies" who
could turn into a nation of "sharecroppers".
In his annual letter to investors in Berkshire Hathaway, the fund
he has run for more than 30 years, Mr Buffett painted a bleak
picture of a future US in which ownership and wealth had
continued to move overseas, leaving the economy in thrallto
foreign interests and faced with financial turmoil and political
unrest.
He said his performance last year had been "lacklustre". He
explained his mounting bet against the dollar in terms of a
spiralling US trade deficit - which, he warned, may be
approaching crisis point.
Mr Buffett said Berkshire had built a $21.4bn (£11bn) position in
foreign exchange contracts, spread among 12 currencies. He
said little appeared to have been done to tackle the problem,
despite constant calls for action from "hand-wringing
luminaries".
"Without policy changes, currency markets could even become
disorderly and generate spillover effects, both political and
financial," Mr Buffett warned. "Such a scenario is a far from
remote possibility that policymakers should be considering
now," the billionaire said, though he conceded policymakers'
"bent, however, is to lean towards not so benign neglect".
The 74-year-old told investors he "tap-danced to work" and
promised them this year's meeting of investors would be another
"Woodstock for capitalists". However, on the subject of the US
trade deficit, his passions appear to be stirred. "This
force-feeding of American wealth to the rest of the world is now
proceeding at the rate of $1.8bn daily."
Mr Buffett said in the last 10 years foreign powers and their
citizens had accrued about $3 trillion worth of US debt and
assets such as equities and real estate. At current rates, he
predicted that in another 10 years' time the net ownership of the
US by outsiders would amount to $11 trillion.
"This annual royalty paid [to] the world would undoubtedly
produce significant political unrest in the US. Americans ...
would chafe at the idea of perpetually paying tribute to their
creditors and owners abroad. A country that is now aspiring to
an 'ownership society' will not find happiness in - and I'll use
hyperbole here for emphasis - a 'sharecropper's society'."
Mr Buffett squarely took the blame for the group underperforming
the market for the second consecutive year, with a 2004 book
value gain of 10.5%. "My hope was to make multibillion-dollar
acquisitions that would add new and significant streams of
earnings ... but I struck out." In part, he said, he had been
frustrated by a lack of "attractive securities to buy", leaving
Berkshire with $43bn of cash equivalents.
· The International Monetary Fund is worried that global growth
is becoming too reliant on the performance of the US and
Chinese economies, according to a report yesterday.
While the Chinese are seek ing to slam the brakes on the
country's infrastructure spending, the treasury secretary, John
Snow, described the US economy as "resilient and dynamic".
According to today's edition of the German newspaper
Handelsblatt, the IMF's forthcoming World Economic Outlook
report will warn of increasing risks to global growth if the US and
China slow down at the same time.
"Global growth is to an inappropriate degree linked to the United
States and China," the IMF report will say when it is published
next month.
"The eurozone and Japan, which together have about one-fourth
of the world's gross domestic product, have once again
disappointed. Thus the risks are increased that there could later
be a sharp downturn especially if the United States and China
are hit with economic slowing."
guardian.co.uk |
