Excerpts from a Bloomberg article on Warren Buffett’s opinion of US Economy.
Billionaire Warren Buffett said the economy will be “in shambles” this year, and perhaps longer, before recovering from the reckless lending that caused the worst “freefall” he ever saw in the financial system.
Stocks and the economy will rebound, and the best days for the U.S. are ahead, said Buffett, chairman of Berkshire Hathaway Inc., in his annual letter to shareholders yesterday. Buffett said he’ll spend the recession shopping for new investments for Omaha, Nebraska-based Berkshire.
“The economy will be in shambles throughout 2009 — and, for that matter, probably well beyond,” said Buffett. “Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so.”
Buffett, an informal adviser to President Barack Obama, said the consequences of the U.S. housing bubble are now “reverberating through every corner of our economy.” Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982, the Commerce Department said Feb. 27.
Late last year, “the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country,” said Buffett, 78. “Fear led to business contraction, and that in turn led to even greater fear.”
“Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown,” Buffett said. “Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.”
Buffett predicted bailouts will cause “unwelcome aftereffects” including inflation.
“Major industries have become dependent on federal assistance, and they will be followed by cities and states bearing mind-boggling requests,” he said. “Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.”