Financial Advice Blog

Buffet’s claims

Warren Buffet seems to believe that, despite what other experts are saying, consumers won’t find debt relief any time in the near future.

“Everything I see about the economy is that we have had no bounce,” says Buffet. “There were a lot of excesses to be wrung out and that process is still underway and it looks to me that it will be underway for quite a while. In the annual report I said that that economy would be in shambles this year and probably well beyond, and I think that is true.”

Buffet claims the biggest contributor to the lagging economy will be unemployment. Buffet believes that this unemployment spike will continue to “depress consumer demand for everything from energy to cars and homes.” Unfortunately, much of the economy’s turnaround is dependent on consumers getting back into spending. The signs are that this is unlikely.

The economic turnaround

Ben Bernanke, chairman of the Federal Reserve, has cited nascent signs of economic recovery abounding throughout the market. He’s been a strong advocate of consumer anticipation of better things to come. However, Buffet’s argument is based on some telling facts about the market. Declines in home building put paid hopes that the credit industry and the economy were turning around to get people buying big ticket items again.

Buffet claims that debt relief for the masses is a long way off because of the seemingly unstoppable unemployment rate. “It looks like we’re going to need more medicine, not less,” he said, meaning that a second stimulus would be needed to spur recovery.

Cautions for the future

Despite some changes and government intercession, Buffet claims that more is needed. He also believes that the stimulus and programs the government has already introduced will impact the economy in adverse ways. “We have done things that raise the probability of high rates of inflation at some point,” he added. He stated that some of the government’s movements have been necessary, but could push the value of cash to record lows.

People’s futures

So people are left to wait it out and see what results the stimulus really will bring. Many people have seen the fall of large corporations and bankruptcy filings by huge companies. They take this as signs to be cautious about their own finances, and make do as opposed to going out and buying again. However, it’s universal that consumers consuming is the key to real recovery. Without confidence in the market, spending on large purchases seems imprudent, and buying a house is not exactly like buying a candy bar. Consumers are opting to go without rather than stretch budgets in murky waters.

Despite Buffet’s words

Despite what Warren Buffet is professing to the public, people are going to have to make their own judgments on what their future holds. They’ll have to be vigilant with finances to get debt relief, and still have room to save for retirement, college, and emergencies. In the end, only time will tell how well the economy will bounce back and what state it will be in once it does.

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