Warren Buffett is bullish, opposes further monetary or fiscal stimulus. Dissenters abound.

I hope Buffett’s right. Bloomberg:

. . .  As for the U.S. economy, Europe’s debt crisis is bound to have some fallout, he said. Still, the impact on the U.S. will be nothing like the 2008 credit crisis, Buffett said on CNN, and the domestic economy is still growing, he told interviewers.

European and U.S. stock markets have sagged on concern that Greece may default on its debts, setting off a chain reaction that could engulf other nations and their banks. Berkshire has made bullish derivative bets on global equity markets including contracts tied to the Euro Stoxx 50 Index, and Buffett has traveled to Europe in search of acquisitions. . . .

The U.S. hasn’t slid into a “double-dip” recession and that the economy doesn’t require stimulus from policy makers, Buffett said. Berkshire owns more than 70 businesses spanning insurance and energy to consumer goods and building supplies.

“We have a recovery going,” said Buffett, who has led Berkshire for more than four decades. “I don’t think that fiscal stimulus or monetary policy from this point forth will do a lot, to be perfectly honest. I do think that the natural regenerative juices of capitalism will do, and are doing, plenty.”

Dissents aplenty today. E.g. ECRI economist, Lakshman Achuthan:

“The U.S. economy is tipping into a new recession,” Achuthan, the group’s chief operations officer in New York, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “You have wildfire among the leading indicators across the board. Non-financial services plunging, manufacturing plunging, exports plunging. That is such a deadly combination.”

Robert Schilling:

On why he sees deflation on the horizon

“In my new book, I identify seven different types of deflation. Now five of those are already in place — we’re having financial asset deflation, tangible asset deflation, commodities are coming down, wages are coming down. The one that hasn’t kicked in yet is goods and services deflation. The point is that the whole world is really marking down assets. It’s marking down the whole spectrum. I don’t think goods and services are going to hold up in terms of inflation. I think that will move to deflation fairly soon.”

On whether the Fed will decide to try to accelerate inflation:

“In effect, [the Fed] tried to do that with QE2. Because you remember at the time they were worried about deflation… That was one of the objectives. Of course, they spurred commodities, they spurred stocks and they got a temporary offset. But I think the forces of deleveraging in the world are greater than the Fed can handle. We’re marking things down to equilibrium. Look at government sovereign debts around the world. They’re much greater than taxpayers can handle. You either have to mark them down or get somebody else to handle them, like the Germans, or try to inflate them away. Inflating away is an excess supply world is almost impossible, even for the Fed.”

Goldman Sachs:

The U.S. and Europe face about a 40 percent likelihood of a prolonged period of economic stagnation should policy makers fail to restore confidence, according to analysts at Goldman Sachs Group Inc.

“The prospect of a long period of stagnant growth is a plausible risk and a legitimate concern for the major developed economies,” Jose Ursua, a Goldman economist in New York, wrote in a report. “Whether these countries manage to avoid a ‘Great Stagnation’ by a pick-up in the recovery is likely to depend on policy being able to restore confidence and putting in place reforms that can decisively jolt growth.” . . .  Economies face a higher probability of such periods after market crashes “precisely of the type observed during 2008-2009,” the report said.

Other bright lights who seem to be dissenters are Fed Chief Ben Bernanke, Noriel Roubini, Ryan Avent, David Rosenberg, and Richard Koo. (See here and here.) And, of course, Paul Krugman, Brad DeLong, Mark Thoma, and Dean Baker, who have been shrill since shortly after the financial crisis began.


About Guy N. Texas

Guy N. Texas is the pen name of a lawyer living in Dallas, who is now a liberal. He was once conservative, but this word has so morphed in meaning that he can no longer call himself that in good conscience. Guy has no political aspirations. He speaks only for himself.
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