Neat Discussion from Warren Buffet on why the dollar might fall...

[Moneyguy1]

We need to ask tabs as buffet master what his take is on all of this.

Seriously...excellent article with a lot to think about.

[1967 R50/2]

Ummm...this article is 3 years old. And I do beleive he was right about the dollar dropping from parity with the Euro to it's current level. But that is not necessarily saying that the trend will continue, although personally I think it might.

[Porsche-O-Phile]

Very good article. Thanks for posting that.

My first thought in reading it is, "oh, the citizens of squanderville won't care - they'll just pass the problems on to their kids and assume that smug 'what-me-worry' expression we've come to expect".

Sound familiar?

[tabs]

The latest from Buffet is the analogy that the USA is this hugh Farm and we are slowly selling it off a piece at a time. But because we are so hugh we just don't notice it. Sooner or later the problems of a negaitve savings rate/trade defceit will catch up and bite us on the a$$.

[RoninLB]

Excess liquidity leads to devaluation. Specific cost inflation is another story.

Some say what's keeping the dollar afloat is the intense growth worldwide and its need for ever increasing capital.


fwiw.. $ growth has been relatively stable but the markets recent ability to anticipate Fed moves keeps velocity high somewhat negating Fed actions.

[RPKESQ]

My worry about the current (1990's till now) situation in America, has led me to invest in real property overseas. I did 4 years of research and then started buying. So far all the trends have supported my choice. I currently get paid in Euros, so I realize a 25% pay increase for any funds spent in the US.

[hytem]

The dollar has dropped the past few years, but I believe it reflects a lack of confidence in the deficit spending of the Government. If the Democrats had been in power the past few years, you can be sure the Republicans would be skewering them for their reckless "liberal" spending ways. I believe it's more about politics than trade deficits, which go back even before Clinton--when budgets were balanced and the dollar was strong.

[Bill Verburg]

Lou Dobbs has been making siome interesting comments about all of this lately

this morning he described our political masters both Dem and Rep. not as parties but as entities trying to make a salespitch for their corporate masters, damn the consequenses to the republic or it's citizens.

[Tobra]

I would be more surprised if the dollar did not fall, with what is going on in the world.

I am a Republican and have been skewering big spenders

[slakjaw]

I remember when this first came out.

Some people were mad at Buffet for being an "anti-American"

Anyways,

I agree with him

[RallyJon]

Originally posted by Wayne at Pelican Parts
There was a sign of this in the 1980s when the same problem was with Japan, and they bought Rockefeller Center...

I'm curious just when the doomsayers will finally be right. When will our a$$ get bitten?

Shall we go back to the '80s and read thousands of pages of financial editorial about the Japanese owning America? How'd that all work out? Can we at least consider and investigate what would really happen if, say, China was to overstep?

I suspect that the dire warnings of imminent a$$ bitings are as far out of proportion as they've always been. But let's be realistic: what are the signs to look out for? I'll start by saying that the trade deficit certainly is NOT one of them.

[turbo6bar]

A dollar fall that does not happen today or in the past does not imply it won't happen in the future.

I feel Verberg's statement is correct. Until we show the politicians we mean business, the charade will go on.

I am considering diversifying outside of the US dollar, but it bothers me greatly, because I'd be betting against the US.

[RallyJon]

The dollar has fallen, and may fall some more. That's what should happen given a trade imbalance. The trick is getting it to fall vs the controlled Yuan.

However, it's a helluva big jump from there to losing control of our economy or our country. Buffett's metaphor of islands falls apart very quickly right about the time that the people are forced to work to pay down the debt. I think that the past few years have shown (for better or worse in the particular case) that Americans are actually pretty comfortable with extreme measures for difficult times. I think that the scope of what we're willing to do to protect our interests has not been adequately factored-in by the doomsayers.

As a short term example, let's say the gov't said we are doubling taxes to balance the budget and start to pay down the debt. We'd have another gov't rather quickly, don't you think?

[Bill Verburg]

How do you feel about the year just completed budget deficit of ~$250 billion, and thats just what they are admitting to

Wish I could run my finances like that

[RallyJon]

I feel annoyed at what they're spending money on, but that's another thread.

All I'm asking is: when do the serious repercussions begin? Other than Bill Clinton's "I stepped in it, let's take credit" moment, our government has been running things the same way for decades.

The dollar weakening is first semester macroeconomics stuff--no big deal. What's the unemployment rate? It's great, that's what it is, in spite of all the doom and gloom. Thank god we don't have to make our own sneakers and can buy them from China, we don't have the labor to spare.

The economy bears a strong resemblance to 1996. Again, the financial press should take a week off and go read what they wrote in the mid-80s, and in the mid-90s. Nobody has any memory on this topic, especially the people who make the dire forecasts that never seem to come true.

[HardDrive]

How do you purchase foreign currency?

There are a number of online currency trading sites, but I am not interested day trading. If I simply wanted to park money in another currency, how would I do it?

I'm talking less than $20k. I suppose I could just buy a big ole' stack of bills and horde them in my mattress.

[Markus33]

You don't need to buy foreign currency to get similar hedging benefits. Buffet's been buying more foreign companies the last few years too.

- Petrochina (PTR)
- Posco (PKX) S. Korean steel co.
- Iscar Israel tool co.

Heck, with you 20k you could also just buy some class B Berkshire Shares (BRKB) at 3k each and let Warren worry about the currency hedging

Markus
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