Warren Buffett, Mr. Know it All.

Warren Buffet is concerned about the tremendous mountain of debt the country is piling up. Last year he said we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover we need to curtail our out-of-control spending, or we'll destroy the value of the dollar and many Americans' life savings.

Some fun facts from Buffett's article today in the New York Times:

Congress is now spending 185% of what it takes in
Our deficit is a post WWII record of 13% of GDP
Our debt is growing by 1% a month
We are borrowing $1.8 trillion a year

$1.8 trillion is a lot of money. Even if the Chinese lend us a record $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we'll still need another $900 billion. So, where's it going to come from? The printing press. And, ultimately, Buffett says, that will destroy the value of the dollar. There goes inflation and by extension, interest rates.

But what does Warren Buffet know anyway?

My personal conspiracy theory: The Obama administration is counting on high inflation to 1. resolve the real estate crisis by increasing the nominal value (as opposed to the real value adjusted for inflation) of real estate, and 2. allow them to repay all the money the government is borrowing with inflated dollars. It won't be the first time in history that high inflation has had both positive and negative effects on the economy. Hope you are getting ready for the ride! The true test of the effectiveness of your ALCO/ALM Committee efforts today will show once inflation is a reality.