Berkshire Hathaway head Warren Buffett says that he considered Federal Reserve Chairman Ben Bernanke a hero in 2008, but the recently announced second round of quantative easing knocked the bloom off that rose.
“I don't get very enthused when central bankers start targeting higher inflation,” Buffett told CNBC. “I think it opens up certain dangers in terms of people worrying about the United States government printing money.”
“I think it has a psychological effect on how people think about the future of money if they think the government will monetize debt,” says Buffett. “Once unleashed that can be a little bit difficult to put back in the bottle.”
However, Buffett also says he “would not want to bet my chips on the fact that the government monetizing $600 billion of debt is going to make a big change.”
“People like to think that government can solve everything overnight,” Buffett says. “It can't do it with fiscal and monetary policy.”
According to Buffett, there’s a huge fiscal stimulus happening in the U.S. now. “Fiscal stimulus comes about when the government spends considerably more than it's taking in,” he says. “We are spending 8 or 9 percent of GDP more than we're taking in, and that's a stimulus that hasn't occurred since World War II.”
Reuters reports that Federal Reserve officials say the U.S. central bank is likely to follow through on its entire $600 billion bond buying program based on an anticipated weak economic recovery.
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