Warren Buffett on inflation & debt outlook
At the annual Berkshire Hathaway shareholders meeting live streamed on Yahoo Finance, Charlie Munger and Warren Buffett discuss President Joe Biden's rescue plan.
BECKY QUICK: This one comes from Tim Medley-- [CLEARS THROAT] sorry, Tim Medley in Jackson, Mississippi, who's been a Berkshire shareholder since 1987. He writes, on March 19, respected economist Larry Summers, the former president of Harvard University and the former Secretary of the Treasury under President Obama, was critical of President Joe Biden's $1.9 trillion American Rescue stimulus plan. In an interview with Bloomberg television, he said, I am much more worried that we will have more inflation, or that we will have a pretty dramatic fiscal/monetary collision. This goes way beyond what is necessary. He said also, this is the least responsible macroeconomic policy we've had in the last 40 years. Your thoughts?
WARREN BUFFETT: You're asking me on that?
BECKY QUICK: He didn't write to who, so I guess anybody on the stage.
WARREN BUFFETT: I would say that Larry has been reading his uncle's book, which was Paul Samuelson. But Larry is a very, very, very smart fellow. And he's laying out possibilities which actually now have probably been voiced a little more even since that March 19-- whatever date it was that he made that.
You can't just do one thing in economics. And if we really could shovel out more and more debt, and the carrying costs turned out to be something very [INAUDIBLE]. People thought Japan couldn't do what they've done. But they, you know-- it used to be called the "widow maker" and-- around Solomon, and people were shorting Japanese bonds. But the answer is we don't know. But Larry's view is an important view. And it's just as good as, in my-- the view on the other side might be.
We don't know what happens from the present policies. We do know, as Jay Powell said the other day, that idea that 100% of GDP was some terribly dangerous level for G-- in terms of debt, and that doesn't really make a whole lot of sense now. And that used to be kind of accepted wisdom.
We've learned that a lot of things we thought before weren't true. But what we haven't learned yet is whether what we're doing now is true. And the best thing to do is recognize you don't know, and proceed in a way where you get a decent result no matter what happens. And that's what we try and do at Berkshire Hathaway.
We do not think we can make money by making macroeconomic predictions. We do think we can pretty darn-- be pretty darn sure we'll get a reasonable result under policies that will not maximize result if we could do that sort of thing.
CHARLIE MUNGER: It's not at all clear whether Larry is right or wrong. And--
WARREN BUFFETT: He's a smart man, though.
CHARLIE MUNGER: He is a smart man.
WARREN BUFFETT: Yeah.
CHARLIE MUNGER: And it's courageous of him to raising it-- he's [? practically ?] the only one talking that way, which I admire by the way.
WARREN BUFFETT: It guarantees he won't get a position in the administration.
CHARLIE MUNGER: Yes, well, that's one of the reasons I admire him.
WARREN BUFFETT: Yeah.
CHARLIE MUNGER: And not that there would be anything wrong with having a position in the administration, but I think people who kind of tell it the way they think it is, I like it.