I.O.U.S.A - Addison Wiggin [86]
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176 The
Interviews
all have this indirect, passing interest in it, and demagogues of various sorts can scare them with economics because it does apply to their everyday lives. But since the average American doesn ’ t usually have the ability to, or even the interest in thinking incisively about the question, they can be subject to very superfi cial arguments.
Q: Why is economics fascinating to you?
Warren Buffett: I ’ ve always liked business; I ’ ve always liked investments; I ’ ve always liked economics. But I ’ m a disaster if you ask me what happens to a split atom or what happens to a cell within a body. Different people are wired different ways.
Q: In 2003, you wrote a story that appeared in Fortune magazine.
Can you tell me a little about this story? Why did you write it?
Warren Buffett: I wrote an article for Fortune on the parable of Squanderville and Thriftville, which was designed to simplify for people the problems inherent in persistent and large trade imbalances. Economics tends to put people to sleep, and I thought that by creating a couple of islands populated by inhabitants with quite widely different activities that it might get across a point that otherwise they get lost on.
Q: What ’ s the general thrust of the story?
Warren Buffett : Well, the thrust of it is that if you own a lot of property — in this case, an island — you can trade it for the things that you consume everyday. And you can do that for a long time, but eventually you run out of property and then you have to work a whole lot harder to provide for your own needs, but also to pay back the debts you ’ ve incurred or to get back the property you want. Short - term actions have long - term consequences that sometimes people don ’ t think about in the short run.
Q: Is there a way to characterize our country and our philosophies nowadays?
Warren Buffett : In the last few decades, but accentuating in the last six or eight years, this country has started consuming considerably more than it produces. In other words, it ’ s relied on the labor of others to provide things that we use day by day.
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We ’ re able to do that because we have lots of things to trade for those goods, so we can trade away little pieces of the country. And, because we ’ re so rich, we can do it for a long time and we can do it on a large scale, but we can ’ t do it forever.
Q: Explain that to me. Why is that?
Warren Buffett: It ’ s like a credit card. My credit ’ s pretty good at the moment; if I quit working and have no income coming in but keep spending, I can fi rst sell off my assets and then, after that, I can start borrowing on my credit card. And if I ’ ve got a good reputation, I can do that for quite awhile. But at some point, I max out. At that point, I have to start producing a whole lot more than I consume in order to clean up my debts.
Q: Let ’ s imagine for a minute that the U.S. economy is a horse and it ’ s in a race, and the other horses are other economies around the world. How strong and how much of a favorite to win is our economy today and historically?
Warren Buffett: We have a terrifi c economy, and the real standard of living in the twentieth century, per capita, improved seven to one. There ’ s never been anything like that in history. And we will have a better economy 20 years from now, and 50 years from now, than we have now. We are continuously getting more productive in the country. We have more people turning out more things.
Our country has a fi ne future economically. You don ’ t want to bet against the United States.
On the other hand, we are creating debts and selling off assets, which will require American citizens in the future to service those debts, and that will take some part of their output. But I want to emphasize