Warren Buffett says government budget deficits matter little – Axios

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Data: Factset: Graphic: Lazaro Gamio / Axios

The annual letter to shareholders by Warren Buffett is out, which is always more interesting when the Oracle of Omaha acknowledges its past mistakes.

Why it's important: In his letter, Buffett gave a lesson to "those who regularly preach disaster because of government budget deficits". He admits that he was himself one of those people, but that's no longer the case.

  • Buffett divides American history into three 77-year periods. The last period coincides with his investor career, which began in 1942 with $ 114.75 savings. Buffett was fortunate enough to start investing at such a favorable time, which preceded an impressive increase in the debt-to-GDP ratio in time of war. (In 1942, it was 48%, in 1946 it was 119%.)
  • America is well managed in its first century and a half. Then, during Buffett's third 77-year period, we managed to increase our national debt by about 40,000%. "Suppose you planned this increase and panicked at the prospect of uncontrollable deficits and a worthless currency," Buffett writes. "To protect you, you may have avoided the stock and decided to buy 3 14 ounces of gold with your $ 114.75."
  • Buffett, of course, became the richest man in the world investing extremely well at $ 114.75. But even if you had just invested in the broader stock market, it would have turned into $ 606,811. On the other hand, if you had invested in gold, your little piece of metal is worth only $ 4,200.

The bottom line: There is no evidence of 240 years of American history that the level of national debt has already really important. The United States prints their own currency and can borrow as much as they want, more and more from domestic investors. According to Buffett, loss-making hawks have preached fate for decades. They have never been proven correct.

Go further: National debt exceeds $ 22 billion

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