Buffett sees signs that recession is getting worse

Much of the recent oil pricing is tied to the Feds NOT raising interest rates. Buffet and most forward thinking folks know this. On the one hand, everyone loves low interest loans but the long term effect is the dollar is worth crap now. Steel has risen not just because of rising costs to produce it but supply and demand have priced it up as well. ( Note to investors: US Steel has been HOT!!!).

-- Bill (Pardon my Google rely... need to setup newserver access now.)

Reply to self to test new Teranews account... very nice!

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Much of the recent oil pricing is tied to the Feds NOT raising interest rates. Buffet and most forward thinking folks know this. On the one hand, everyone loves low interest loans but the long term effect is the dollar is worth crap now.

Than why the US $$$ worth crap? What happened fundamentally? War? JS

Steel has risen not just because of rising costs to produce it but supply and demand have priced it up as well. ( Note to investors: US Steel has been HOT!!!).

-- Bill (Pardon my Google rely... need to setup newserver access now.)

================= Fundamentally because the US government has been printing money to pay its bills for the last 30 years. These fall into two major categories: (a) the federal deficit, and (b) the current account trade deficit. [While the current accounts trade deficit is largely privately generated debt, the money is printed by the Feds and much of the debt is recycled back as foreign owned US treasury notes. [FWIW -- the trade deficit is currently running about 2 billion $ *A DAY*]

The war is a second order cause in that it requires a higher federal budget which increases the deficit, much of the war material is imported [e.g. oil, electronics] increasing the current accounts trade deficit, and it also diverts much domestic production capacity from productive to minimally [or even] counter productive industrial output and engineering effort.

There is also the diplomatic/foreign relations problem that because of opposition to the war and continued unilateral US action, the other nations are not "cutting us any slack," even if they are not engaging in overt financial obstruction/retaliation.

In the internal private sector, the value of US financial instruments [stocks, bonds, derivatives] and consequentially the US dollar has been damaged by the revelations of wide spread corporate fraud, and the continual mis, mal and non management of too many domestic US corporations [e.g. grossly excessive executive compensation] with stock prices at depression levels when adjusted for inflation [e.g. GMC, Ford, Chrysler]. Many of these problems in the private sector have been created or exacerbated by grossly underpriced credit resulting from the injections of [hyper] liquidity because of the federal deficits and current accounts trade deficits, in addition to lax enforcement and acceptance of "creative" accounting, leading to the current "free to do anything you want market."

Any one factor would be bad, but in combination these form "the perfect storm," and unfortunately, the "cure" for one symptom such as inflation (by raising interest rates), simply makes the other conditions worse by increasing the cost to roll-over the federal debt and service private corporate debt. Similarly, attempting to control the current accounts trade deficit by imposing high import tariffs would now dramatically increase consumer prices/internal inflation and damage our exports, most likely making the overall problem worse rather than better.

Note that there is no point in blaming external forces or organizations such as OPEC for these problems. We did it to our selves over 30 years, and now must pay the price.

What is clear is that the traditional nostrums, snake oil, "pink pills for pale people," and "bafflegas" will not correct the situation.

We are now seeing one of the results in the attempt by InBev to buy Budweiser.

Note that for the same amount of money they are offering for Budweiser [46 billion], InBev could buy GMC *AND* Ford *AND* Chrysler with money left over....

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

Take a look at the graph on US dept.

Debt is a direct result of over borrowing. Think of the US as a home who's owner has kept borrowing against it.

Now. Look at who the "owners" were during the spending phases.

-- Bill

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