Warren Buffett says....

[xoxoxoBruce]

The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investor Warren Buffett said in an interview published in German magazine Der Spiegel on Saturday.

He said the United States was "already in recession" and added: "Perhaps not in the sense that economists would define it" with two consecutive quarters of negative growth.

"But the people are already feeling the effects," said Buffett, the world's richest man. "It will be deeper and last longer than many think."

He also said...

Buffett also renewed his criticism of derivatives trading.

"It's not right that hundreds of thousands of jobs are being eliminated, that entire industrial sectors in the real economy are being wiped out by financial bets even though the sectors are actually in good health."

Buffett complained about the lack of effective controls.
"That's the problem," he said. "You can't steer it, you can't regulate it anymore. You can't get the genie back in the bottle."

I see the same thing happening with oil, in that "financial bets" are driving the cost up.

Link

[skysidhe]

Deregulation used to be a good thing. I think that was the original republican premise which was not to put a cap on the american dream ( probably his and Cheney's) but these days too many corporations are money hungry gluttons walking on the very backs that make them so rich.

I knew this would happen when Bush took the cap off government regulation. Somehow his 'small government' mission was skewed. Well we all know HOW.

[tw]

Originally Posted by skysidhe

I knew this would happen when Bush took the cap off government regulation. Somehow his 'small government' mission was skewed. Well we all know HOW.

Problem was being created long before this. What Warren Buffet discusses is the same finance games that were also called Enron, et al.

Clinton administration tried to institute some responsibility. Massive budget increases were recommended for the SEC. A Republican Congress threatened to eliminate the SEC if law enforcement was increased. It was well known the lowest paid lawyers in Washington are SEC lawyers. No smart lawyer stays where they are not wanted.

Enron was added to a list that included, Global Crossing, MCI, Waste Management, etc. All directly traceable to money games with the spread sheets. George Jr was elected. Harvey Pitts (SEC Commissioner) refused to prosecute these. The State of Oklahoma filed suit against Enron - embarrassing Pitts, et al. So the SEC reluctantly prosecuted Enron - what wacko extremists did not want.

Well the Congress was so appalled when the public complained about Enron as to ask Harvey Pitts if he would accept a doubling the SEC budget. Harvey Pitts refused - live on TV. After all, tax cuts, et al are for enriching selective Americans. They could do this since so many middle class Americans remained so ignorant as to also even believe lies that justified "Mission Accomplished".

Warren Buffet was quite vocal back then (along with a clear majority of America's richest men). On Nightline, Buffet noted how his receptionist paid higher taxes percentages than Buffet did. People who got rich by actually producing something (Buffet, Bill Gates, etc) were also critical of eliminating inheritance tax - more welfare for the rich by wacko extremists. After all, others who get rich using money games and corporate welfare also bought politicians - K Street, et al.

So where are we today? Income of the average American has fallen about 2% since George Jr came to power. Dumb supporters of George Jr will blindly deny this reality.

Mortgage crisis is not about balloon loans. It's about NINJA loans because those loans will be bundled into financial instruments - sold as bonds or stocks. Nobody cared whether the borrower had an income or a job apparent. Even Merrill Lynch's president (once a conservative company known for fiscal responsibility) ordered massive investments in these risky investments. Where did those investments appear on spread sheets? Nowhere. Just like Enron - ie SIV - risky investments were also called off-balance sheet investments. Classic money games.

This past spring, financial markets just locked up. Why? Everybody feared doing business with others. Nobody trusted anyone else's spread sheets because lying was acceptable - all but encouraged by the SEC and George Jr's administration. So dangerous was this complete financial seizure that the Government had to go in with $billion loans on low interest rates. IOW the government was again bailing out the people who were irresponsible, protected by George Jr's administration, and had been reaping massive financial rewards.

How corrupt was this? A senior VP at Merrill Lynch warned of it a year earlier. So he was fired. Only finance firm that appears to have seen the corruption (and hedged accordingly) was Goldman Sachs.

When government throws money at an economy to create false wealth, then that economy takes revenge four and more years later. We will now suffer a recession directcly traceable to George Jr money games. This poster was also warning of this years ago because so many responsible people were warning of it long ago. For example, how many denied the so many symptoms such as an impending housing price crash?

So what are politicians saying? We must keep interest rates low and inflict inflation for economic incentives. Deja Vue Nam? Stupid fools did this exact same thing as Vietnam debts came due. Back then, America ended up selling the world's third largest industrial base (America's foreign owned businesses) to pay for economic incentives and too many dollars held overseas. And then came stagflation. What eventually fixed it back then? 13% and 22% interest rates. There is no free lunch no matter how often George Jr denies it.

How dumb are we to forget lessons of 35 years ago - complete with rising oil prices, rising commodity prices, excessive energy consumption, crappy American cars, too many dollars held overseas, record high gold prices, falling American dollar, denial of those problems by a dumb extremist president, an unjustified and useless war, and American allies almost universally warning us of our mistakes. Our more wacko Democratic and Republican politicians advocate economic incentives - forgetting that also created the 1970s economic nightmare. This resulting recession is directly traceable to a government that solved problems by throwing money like a grenade. That even spent the Clinton surplus in the name of corporate welfare, etc.

Totally irresponsible policies such as tax cuts are now doing to the economy as this author warned back in 2002.

Meanwhile, what did Warren Buffet also say about wacko George Jr tax cuts back on 2002 (on Nightline)? The only tax cut is one that cuts spending. Instead, George Jr did exactly what Nixon did. Massive spending. Even "Mission Accomplished" spending does not appear in the Federal Budget so that he can spend more money using myths. How many 747's packed full of $100 bill pallets were distributed in Iraq without any accounting? Three. There is no free lunch. With a dollar depreciated to only 60%, we have still to see the looming economic disaster (massive recession) created by wacko extremist spending and no fiscal responsibility.

None of this is new or difficult to understand. Responsible people have been warning about this for years. My posts years ago summarized their warnings from responsible rich mean - ie T Bone Pickens. Were you so deaf as to ignore them and listen to wacko extremist Cheney? Did you not worry when Cheney said, “Reagan proves that deficits don’t matter?” We have yet to pay for his fiasco.

Well Donald Trump just came back from a world tour of foreign nations. He was most blunt and honest on Fox News noting how the world is building - becoming even more productive. Trump cited George Jr’s war and wacko spending for an America that is not and cannot do the same construction ongoing throughout the world. Whereas all those other nations are building, instead, America is spending on useless wars. Meanwhile, America had no effort and is still not trying to find bin Laden.

We are spending massively on a war justified by lies. We have no dollars or economic reserves for building or growing America. Eventually the GDP numbers will reflect that reality. Trump could not have been blunter. And Donald Trump – like the majority of wealthy men (ie Ted Turner) – was telling you what to expect because of George Jr et al.

Let’s see. How anti-American are companies, such as GM, who will seek corporate welfare and government protection from free markets? GM stock has just set a new low because their products are so crappy. GM stock is now worth less than its worth in 1982. Why? GM products are that bad. GM debts are now that massive (ie 0% financing to sell autos). GM is another trophy of what happens when bean counters and wacko extremist politicians play money games four and more years ago.

Who would not expect a recession? Everything posted here should have been obvious to everyone long ago. Above - nothing is a mystery. Why have so many rich men been warning about these coming problems years ago? Because the mistakes we were making six years ago now must be paid for.

It's called a recession. God help everyone if we stay so much in denial as to suffer stagflation. We no longer have the world's third largest industrial base to sell off - to pay for fiscal irresponsibliity.

[tw]

From The Economist of 17 May 2008:

...banking blow-outs lop an average of two percentage points off output growth per person. The worst crises reduce growth by five percentage points from their peak, and it takes more than three years for growth to regain pre-crisis levels.

[classicman]

I'm just bustin stones here and I gotta admit I didn't read your long ass bok/novel/post, but were there cites in there anywhere??


Seriously just askin cuz it seems thats an issue lately.

...as you were...

[TheMercenary]

[tw]

Originally Posted by classicman

I'm just bustin stones here and I gotta admit I didn't read your long ass bok/novel/post, but were there cites in there anywhere??

I wrote it. Isn't that enough?

Various sources are numerous and include years of published history. Limiting the question to a specific paragraph might be easier. However more important are the underlying points that numerous sources have warned about; a summary of statements from so many who warn about a future that could be severe or only recessionary. A summary of statements that say why those economic problems would exist. A summary most useful to monitor and learn from history in the following years.

What is ongoing? Financial markets have written off about $150 billion. Predictions put the eventual write-offs at about $265billion. Companies such as GM are still suffering (and trying to mask) massive losses which is why GM stock is the lowest price in 26 years (in direct contradiction to the company's spin). In the past few years, about $3trillion has transferred from the industrialized nations to oil producing nations. $3trillion is equivalent to one US economy.

As Sir Richard Branson noted, he has seen these economic crises three times in his professional lifetime. But never has he seen so much wealth get transferred so quickly. Well, if destructive, then economic spread sheets will report massive losses (followed by job losses or inflation) many years from now. Be aware of what has been happening now to learn from what results years later.

A late 1920 stockmarket crash was followed by depression much later in the 1930s. Economic damage takes years to eventually appear on the spread sheets. America is leaching massive liquidity. We already know such losses have been routinely hidden in off-balance accounting and other 'Enron' techniques. George Jr has long since spent a government surplus and then spend massively more ("Reagan proved that deficit don't matter") that included welfare to the rich. Eventually that economic outflow must result in problems.

We know those totals are large. We don't know how large or where those losses reside. A severe shortage of details and too much 'creative' accounting has everyone making informed speculation.

Most are predicting negative consequences. Today, the president of Dow Chemical was resounding negative. His feedstock (raw material) prices have risen 42%. He announced cross the board 20% price increases. From the NY Times of 29 May 2008:

The move came as little surprise to industry watchers since prices for natural gas, a key chemical industry feedstock, have jumped by 56 percent since the end of 2007, and crude oil prices have risen 32 percent to above $125 per barrel.

Meanwhile our government has been claiming no significant inflation for years (inflation numbers ignore cost increases in food and energy). Cost of living has been rising quickly everywhere except on the spread sheets. An underlying factor in that Dow Chemical statement.

BTW, the resulting recession during Nam also started this way.

During Nam, America had plentiful natural gas reserves to keep energy prices down. From the NY Times of 28 May 2008:

While natural gas prices in the United States have spiked to over $11.80 per thousand cubic feet from $7.50 at the beginning of the year, the price that gas producers can draw in many other countries in the world is several dollars higher.

America is now also an importer of natural gas. At what point does the world stop accepting so many American dollars due to so much deficit spending?

Bad economic news is everywhere with very little good news. Watch what happens so that you can quickly identify a lying mental midget 30 some years from now.

[classicman]

No thats not enough, and you don't think I read that post either do you? C'mon you can chop 40% of that off and still make whatever your point is can't you? C'mon your a friggin engineer for cryiin out loud!

[Undertoad]

Bad economic news is everywhere with very little good news.

"Perhaps not in the sense that economists would define it"

But there is always bad economic news, and it's all about what you make of it.

In 2001 before 9/11, the late 90s boom was over and things were looking a little sour. Some were very pessimistic and predicted recession:

Originally Posted by tw in 2001

But there is the expected recession that always follows 'Tax Cuts to stimulate the economy'. How will he deal with that predictable phenomenon.

In 2002 the economy was sluggish, hurt in many sectors but not in actual recession. Some disagreed and said not only were we IN recession but being pushed deeper:

Originally Posted by tw in 2002

Even with a tax rebate (another idea that only mental midgets would promote), this current president pushes the economy into deeper recession WHILE turning (in one year) budget surpluses into deficits that were only exceed by Reaganomics.

By 2003 everything was about the war, but some were convinced we were in recession (although "perhaps not in the sense that economists would define it" - in fact we were never even in negative growth, never mind two quarters of it) and that it was being "extended".

Originally Posted by tw in 2003

Such a President issues a tax cut that does nothing for the economy and now (two years later as predicted) only extends a recession (tax cuts to solve recessions have always been mythical with real, long term, negative consequences).

The economy was getting pretty good in 2004... "as economists would define it." Yet some claimed the end was around the corner:

Originally Posted by tw in 2004

As I noted back when they were advocating tax cuts, history says you get a short term boom followed by a recession. The boom is over.

By election time in 2004, the media was utterly focused on job losses, except our boy:

Originally Posted by tw in late 2004

Furthermore, price increases from $53 per barrel oil has not yet appeared in the US. Expect gasoline that was selling at $1.79 per gallon to rise to maybe as much as $2.30 per gallon. Then we really start seeing a recession. Those decreases profits don't yet reflect the rising costs of oil.

The economy was in great shape in 2005. Some said the recession was "right on schedule".

Originally Posted by tw in 2005

The upcoming recession appears to be right on schedule - starting with the president's tax cut, his insistence that we consume more energy, and of course that no one expected the levees to be breached.

Things were pretty much booming in 2006.

Originally Posted by tw in 2006

Recession in inevitable due to an administration that spends money on wars, tax cuts, a corporate welfare like the top man was an alcoholic.

2007? The jobs recovery was so strong even *I* got one. But some people thought the end was just around the corner and even thought they could predict the month of, not just recession, but outright panic and crash:

Originally Posted by tw in 2007

Now for caution. Market analysts like to panic in October. October with so many panicked market analysts tends to imply a stock market meltdown.

Did the stock market crash of 1928 create the recession? No. Those problems existed long ago - masked by easy money. If we are in a recession, then market analysts are only just beginning to suspect it - which makes October so dangerous.

Recession is inevitable. The markets go up and the markets go down. It's called the business cycle, and it has happened since the very beginning of measurement of the economy. Predicting recession is a game of fools. Merely playing it means you have already lost. Play it consistently... and you are only a remarkably consistent loser.

[tw]

Originally Posted by Undertoad

In 2002 the economy was sluggish, hurt in many sectors but not in actual recession. Some disagreed and said not only were we IN recession but being pushed deeper ...

The economy was getting pretty good in 2004... "as economists would define it." ...

The economy was in great shape in 2005.

Apparently you ignored what was posted back then. What did the 2002 tax cut create? Economic results appear four to ten years later. As posted so often and ignored in this UT post: the resulting return on investment - all that spent money in 2002 - has only recently appeared in the real economic numbers. How curious. Back then when UT was parroting the George Jr mantra, he cited the Kennedy tax cut. He also forgot the resulting downturn that resulted from that tax cut many years later.

When did the massive spending on Nam in the late 1960s result in economic disaster? Mid 1970s. There is no free lunch. Throwing money at the economy like a grenade creates a short term drunken party for the finance people; followed by economics taking revenge years later. Those tax cuts were criticized by this author for doing what is happening now.

Throw money like a grenade and it will cure economic problems? Classic bean counter rationalization where today’s investments are only measured in this year's spread sheets. So we reaped a massive reward from 2002, 2003, 2004, etc tax cuts by a market growth of 15% or 20% annually? Oh. The stock market has had near zero growth since George Jr took office. That near zero growth is what happens when government solves economic problems by pumping money into the economy. And inflation. And rising commodity prices. Jobs with stagnant income growth.

UT, there was never a budget surplus from George Jr - except in George Jr press releases. The only government surplus has been in lies. How convenient. They forgot to include the debts from selling Treasury bonds, etc overseas. All that incoming foreign cash to the government was surplus as long as we forget the long term debt obligations. How curious. Enron accounting.


America has been leaching wealth everywhere for the past seven years. Eventually what happens when we spend wildly on welfare to the rich? Eventually even the dollar drops to only 60% of its value. Good that we punish everyone for that 'welfare to the rich' tax cuts?

George Jr's reign has harmed the American economy. We are only just beginning to see the resulting debts. Deja vue Nam - the worst has yet to appear. Since we are spending like a drunken sailor on "Mission Accomplished", then the economy has not yet been punished for that disaster. That punishment will get worst as soon as war spending terminates. Still pending is the economic punishment that should result from "Mission Accomplished".

Which war resulted on only a mild downturn? Desert Storm. Why? The world paid America for much of that war. We have yet to see most of an economic backlash from "Mission Accomplished".

Let's see. How good was that economy? When George Jr came to office, the stock market was about 11,000. At average growth (8%), that market should be at 18,800. Instead, the market is only at a paltry 12.500. A market growth of only 1.8%. UT says that is a robust economy? If these tax cuts were so good, then where is that 10% and 20% growth rate? And still to come is the resulting downturn created by that 'welfare to the rich'. Still to come is the resulting downturn when "Mission Accomplished" ends.

Yes recessions occur and are necessary - because bad management must be removed. Recessions occur mildly or infrequently when management is more responsible - driven by the product and not by money games. America before George Jr was doing quite well with mild recessions and a longest periods of growth because (in part) the government did real tax cuts. Government cut spending rather than provide 'welfare to the rich'.

Recessions are also inevitable because the naive somehow and stupidly believe voodoo economics - throwing money at problems. Recessions have one factor in common. An economy drunk on too much money creates wealth in money games rather than in product innovation. Enron, 'welfare to big Pharma', tax cuts only for the rich, stifling of science and technology especially by White House lawyers, ... Massive economic activity fueled by easy money means "Greed is good" or "The purpose of a company is profits". No wonder GM need not create a hybrid after the government gave GM $100million. George Jr loves corporate welfare. No wonder the airlines can be given $8billion by the government with no strings attached, eat through that money in 8 months, and come back to George Jr for more. Welcome to the George Jr economy where the Haliburtons get wealthy by producing nothing. Where GM's business school graduates design products so crappy as to require 0% financing. So where are the profits from that 0% financing? Now GMAC, the last profitable part of GM is losing money. Using money games, GM simply deferred their losses to make top management look good. More Enron style accounting.

How ironic that most of this nation's innovation occur as far away from George Jr as possible - the west coast.

Any nation that spends almost $100billion annually on "Mission Accomplished" AND racks up record debts selling bonds to pay for those debts can have good looking economic numbers (ie 2004). Those numbers belie the eventual reality which is just starting to appear. Long term debt did not result in capital profits. America must now sell more capital assets to pay for George Jr's "we will fix the economy" mismanagement. For example, who is buying American mortgages? Foreigners. Within the next decade, who will prosper from an ROI from all those mortgages? Not Americans. We are and must sell off America to pay for the drunken party in 2002, 2004, etc.

A government that once had surpluses has had recorded deficits every year under George Jr - an MBA. The markets have seen how much growth under George Jr? A paltry 1.8% - and UT calls that economic growth. Pension funds once needed 5% to break even. During George Jr's reign, pension funds started assuming a 10% growth. So what are those investments averaging? 1.8%. How will GM pay for that $7billion pension fund deficit? PBGC. Pension fund shortages will then be paid for by the government. Just another looming problem created because American financial growth has been so pathetic and the problem ignored. "Don't worry; be happy", says UT.

If things are so good, then why has the average American seen his income drop by 2% in the past seven years (adjusted for inflation)? According to UT, this is also good? Why are we witnessing the greatest income disparity since the great recession? UT also says this is good economics. And then American wealth decreased by another 40% with a falling dollar. Back during Nixon's time, the bean counters also said that massive dollar drop was good. Then the 1970s recession got only worse.

It’s not all as bad as this post might imply. But UT's rosy picture is a drunk with a credit card that has no limits. We have massive debts to pay due to President Cheney's gross economic mismanagement, corporate and wealthy people welfare, "Mission Accomplished", protection of high drug prices, immigration problems, White House lawyers doing the science, unilateral termination of world treaties, stifling of innovation especially where we needed it most (energy consumption technologies), etc.

UT is denying the lessons even from the Kennedy tax cuts. We are now reaping the 'benefits' of those tax cuts. Only question is how severe that resulting economic punishment.

[lookout123]

See the thing is you point at every recession and say it was the obvious and unavoidable result of some policy you disagreed with. Recessions are an inevitable and necessary part of the cycle. They aren't happy joyjoy moments but they are to be expected and accepted. People, like you, who take every chance they can to say "a recession is coming because ______", act like you were right when the recession eventually come along.

It's like the guy who wakes up angry at his neighbor at 8 in the morning. At 9 he says darkness is coming because his neighbor was loud last night. At 10 he says darkness is coming because his neighbor left his garbage can out too long. At 11 it's because his neighbor voted republican last election. At 12 darkness is imminent because his neighbor's wife is brainwashed and won't listen to you. It goes on and on right up until dusk. Then at 8 PM he's running around the neighborhood screaming "I was right and you're stupid! I told you dark was coming and it's all the neighbor's fault! You deserve it because you didn't listen to my GENIUS!!!!"

[Undertoad]

Judging an economy by the DJIA is like judging a hooker by her ankles. Sure, it might give you a hint but there are much better places to look, if you want a sense of what's happening.*

Around here we judge the economy by GDP, primarily. It's the one the economists use. You can pick whatever indicator you like and claim it means something, but the GDP reflects your beloved productivity, and pretty much sums up everything going on. The stock market reflects only one single sector of investments, and guesses, and fashion, on the worth of ONLY public incorporations.

*disclaimer: no actual hookers were consulted or judged in any way.

[lookout123]

A simple glance at history will support that view UT. S&P and DJIA frequently go up even when the economy is troubled. They also frequently go down when the economy is fundamentally sound. They are simply indices of composite pricing for a number of companies. The DJIA is only 30 companies, remember.

[Undertoad]

The numbers are in!

Estimated GDP growth, 2nd quarter: 1.9%

Actual GDP growth, 1st quarter: 0.9%

[classicman]

Whats it all mean, captain.