I.O.U.S.A - Addison Wiggin [87]
Q: Do you think that you could make an argument that Americans are living too well, or maybe beyond their means?
Warren Buffett: Well, we are using up some of our national credit card and selling off a small portion of our assets every c14.indd 177
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Interviews
year in order to consume more than we produce. But the value of the country goes up annually and over the decades, so we can do some of that. We can still improve the standard of living per capita, not as much as if we weren ’ t consuming so much, but we will still be improving the standard of living. The time will come, however, if we continue this policy, when Americans will fi nd that 2 or 3 percent of their labor every day is going to service the debts incurred by the overconsumption of the present people. They ’ ll still live very well — I want to emphasize that.
Q: Is the fact that we ’ re not saving as a country and the fact that there ’ s much more foreign ownership of our bonds and our debt interconnected, and what are the ramifi cations?
Warren Buffett: Well, we ’ re transferring small bits of the country — ownership of the country, or IOUs — to the rest of the world, but our national pie is still growing. In other words, we ’ re like a very, very, very rich family that owns a farm the size of Texas, and we have all this output coming from the farm. Now, because we consume a little more than we produce, we ’ re selling off tiny bits of that farm daily, a couple billion worth, or we ’ re giving a small mortgage on it which we don ’ t even notice, but it does build up over time. On the other hand, the farm is getting more productive all the time. So even though we own a little less of the farm, or we create these IOUs against it, our equity in the farm actually increases somewhat. That ’ s why people will benefi t over time. But they won ’ t benefi t as much as if they hadn ’ t given the IOUs or sold off little pieces of the farm.
Q: At some point in the last few years, for the fi rst time ever, you bought foreign currencies. Can you explain to me your own personal faith in the U.S. dollar? Has that faith changed or altered in the last few years? If so, why?
Warren Buffett: Both personally and at Berkshire Hathaway, we have far more assets in dollars than in all other currencies combined. So it is not like anything drastic is going to happen in the United States. On the other hand, if you give more and more of your IOUs to the rest of the world and you denominate them in c14.indd 178
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your own currency, history shows that countries that do that have an interest over time in infl ating and in having their currencies worth less. If I could fi nance all of my own consumption today by handing out something called Warren Bucks, or Warren IOUs, and I had the power to determine the value of those IOUs over time, believe me, I would make sure that when I repaid them 10 or 20
years from now that they were worth less, per unit, than they are today. So any country that piles up external debt will have a great temptation to infl ate over time, and that means that our currency, relative to other major currencies, is likely to depreciate over time.
Q: What is a gold standard, and is the gold standard a viable option these days?
Warren Buffett: I do not think that the gold standard is a viable option, and I don ’ t think that gold has magic attached to it.
It is true that when you turn paper money in, what you get in exchange is more paper money. If you have a gold standard you can get some gold, but you can ’ t do much with gold, either. Over time, people have dug up gold from the ground in far, remote areas and then they ’ ve shipped it thousands and thousands of miles and they ’ ve put it in the ground over here and hired guards to stand over it. So the real utility