Buffett says U.S. Treasury bubble one for the ages | Reuters: "NEW YORK (Reuters) - Warren Buffett, whose Berkshire Hathaway Inc (BRKa.N) (BRKb.N) sits on $25.54 billion (17.8 billion pounds) of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing."
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After the '82 recession the economy got going with what I would characterize as a defense spending bubble and leveraged buyout bubble and the savings and loan bubble. Then after the USSR collapsed, and the 1991-92 recession, we had the dot com bubble, and when that crashed we had the housing bubble. Now that crashed. So apparently we are now on to the Treasury bubble.
My question is: when is the US once again going to have an economy that is based on producing something real that people get paid to make, and that people actually need and will pay for?
1 comment:
"My question is: when is the US once again going to have an economy that is based on producing something real that people get paid to make, and that people actually need and will pay for?"
I'm not sure this is the fundamental problem. What you describe are boom and bust cycles borne of out excessive speculation and leverage -- which I see as the real underlying problem.
What's lacking isn't a basic economy as you suggest but rather prudent diligence and underwriting in economic transactions that have fueled the abuse of speculation and leverage. When diligent underwriting goes out the window in favor of cash flow underwriting such as we've seen in the mortgage banking industry, the consequences can be severe for the economy as a whole.
What's striking in the current economic contraction is the wholesale abandonment of diligent underwriting across all types of financial service industries in pursuit of short term gains. Free marketers like Alan Greenspan were flummoxed by this economic behavior that's contrary to the core principle that economic actors in a free market act in their rational best interests -- and do not cut their own throats lemming like and bring about a large scale economic crisis.
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