Skip to comments.When rich guys' superstitions pose a public threat(Gates & Buffett talk down the dollar at Davos)
Posted on 02/22/2005 1:10:44 PM PST by The Loan Arranger
According to USA Today, "Our greatest businessmen (Bill Gates and Warren Buffett) think we are doomed to fail." Gates demonstrated his pessimism in an interview at the World Economic Forum in Davos, Switzerland, when he told reporters, "I'm short the dollar. ... The ol' dollar, it's gonna go down."
It's not surprising that the world's richest man came down from the Alps pessimistic. The misconceptions, myths and superstitions that pass for sound economics in Europe these days remind us that while socialism may be dead as a political force in the world, its zeitgeist of radical egalitarian leveling, gigantic government and bureaucratic control over the minutiae of everyday life lives on in the hearts of European politicians.
German Deputy Finance Minister Caio Koch-Weiser is illustrative. At Davos he was preaching that the U.S. budget deficit is "the No. 1 risk, disregarding geopolitical risks" to the global economy. He said it was urgent for President Bush to offer a "credible" plan for getting the deficit under control.
The unstated plan, of course, is a pre-emptive strike" against estimated future budget deficits in the form of higher tax rates on investors, ostensibly to improve investor confidence. It's nothing but 21st-century economic quackery, much like 19th-century physicians thought the way to cure a sick man was to bleed him.
The "Genius of Microsoft" also has heard this doom and gloom preached by his close friend and bridge partner, the second-richest man in the world, Buffett, who told Forbes Magazine recently: "The rest of the world owns $10 trillion of us, or $3 trillion net. If lots of people try to leave the market, we'll have chaos because they won't get through the door."
(Excerpt) Read more at townhall.com ...
This is the signal to buy dollars.
The main thing holding the dollar up is the Asian Governments and the Japanese and Chinese central banks in particular. It frustrates the heck out of most anti-u.s folks that these countries continue to buy our government securities. In a way they are subsidizing U.S hegemony. That probably serves their interests especially since it provides a powerful lever to pull to prevent confrontation.
Soros of course is singing the same toon. However, the US leads Europe in productivity, economic growth, lower tax burden, and most other economic indicators, and Europe is also burdened with worse aging population then we have. There is no way in heck I would be betting on the Euro longterm over the dollar.
Even Saddam had dollars with him at his capture.
Buy dollars, dump windows
Anybody holding dollars is going to get bent over a table. Fannie Mae is melting down. Kiss the money center banks goodbye, kiss the money market repos goodbye, kiss real estate goodbye, kiss the bond market goodbye, etc. Oh, and there's the little problem of the FedGov having more unfunded liabilities than all the friggin privately held wealth in America....not counting a GSE and banking bailout mind you. Yep, I'm afraid the dollar is going to have die.....again.
explain that to the south korean central bank today, and the other central banks who may well follow their lead.
currencies are becoming less and less of a "bet" on the underlying economies that float them. its all paper, liquidity, and trade flow.
china does it because they have to do something with all the dollars they accumulate.
japan does it because they need exports to the US and they cannot afford to have the yen be fairly valued - the price of their exports to the US would rise significantly.
this whole currency game is going to blow up if we are not careful - and the underlying problem is the existence of the chinese peg. force china to drop the peg, and the rest of the players would achieve some kind of sane equilibrium. absent that - buckle up.
Don't blame the messenger. Gates and Buffet aren't the problem. The dollar is going down. The government can't spend so much with no consequences. It's just supply and demand. The gov. has more debt than the world is prepared to buy.
Yes, Bill and Warren are social libertines who are now more obviously leaning toward socialism. But doesn't Jack have enough knowledge to know that their information came from very highly paid economists? ...can't ride the propped-up dollar gravy train forever. Adjustments happen sooner or later. Hang on and save, folks.
You sound like Jimmy Carter. I'll trust the markets.
Seriously, what other currency would you buy?
I agree. Gates may know 1's and 0's like champ, but he doesn't know everything.
Cheer up Bill, it's cool to be you.
There is simply no viable currency available on the planet as we are in an era of competitive currency devaluation.
The best thing to do is to hold short positions and stuff the short money into hard assets that have not been distorted by credit bubbles.
For example, a FNM short with the money in BPT or CEF works for me.
That insignificant Georgia Tech drop out?
I drink my whiskey clear, thank you very much.
I like your plan. I was afraid you were one of those guys who say buy Euros or buy Yuan.