Tags: Buffet | rate | cuts | over

Buffett: Fed 'Played Out' on Rate Cuts

Monday, 19 May 2008 05:21 PM

There's not much to be gained by more rate cuts, says homegrown multi-billionaire Warren Buffett.

The Fed is done, said the famed investor, having recently cut rates again to 2 percent from 2.25 percent.

"They've played that out. If you get rates down too low, you've got a real problem. I think I'd quit now," Buffett told CNBC.

And, although tens of billions of dollars in government checks continue to go out to millions of Americans as part of the economic stimulus package, Buffett isn’t buying the logic.

"I don't think the stimulus package is going to do an enormous amount of good," he said.

"In fact, I think when most people get it, they really should pay down their credit card debt," he advised.

Putting too much money into people’s hands right now — like cutting rates too far — might actually do the economy some harm, Buffett warned.

"Instead of dropping six hundred dollars from the sky you could drop six thousand dollars...but it has consequences later on in the inflationary area. I think you have to be a little careful about dropping money on people."

Obviously, you can stimulate the economy by mailing money to people, he observed.

But, rather than spending the money on consumer goods and revving up the economy, as the package was designed to do, Buffett said people would be better of paying off debts.

"I think that anybody paying 15 to 18 percent on credit card debt is out of their mind if they don't take the stimulus and pay down the credit card debt.

"They're not going to be able to earn 15 or 18 percent on [their] money. To the extent that they're in the hole now because they've over-borrowed in the past, they should pay down debt,” Buffett said.

On the matter of inflation, and especially high commodity prices, including steel, Buffett said the key indicator to watch is salaries.

"I think we've got of a lot of inflationary pressure, which has not gotten to wage pressure yet. When and if it gets to that, the fun begins,” he said.

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There's not much to be gained by more rate cuts, says homegrown multi-billionaire Warren Buffett.The Fed is done, said the famed investor, having recently cut rates again to 2 percent from 2.25 percent."They've played that out. If you get rates down too low, you've got a...
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2008-21-19
Monday, 19 May 2008 05:21 PM
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