As dark as things might look now, the U.S. is on the right track long-term, says billionaire investor Warren Buffett.

"My children will live better than I did, and my grandchildren even better," says the world's third-richest man and its most famous investor in an hour-long interview recently on CNBC.

"In the 20th century, the real standard of living in the United States went up seven for one. A great many of the factors that went into producing that really unprecedented gain in how people live ... are still present.

"We have a market system, we have a meritocracy, we have the rule of law.”

“None of them are perfect, but they have combined in the past to move one generation after another ahead of the one that preceded them. That will continue to be the case."

Buffett warned, however, to expect markets to do the unexpected.

"Markets will do very wild and unpredictable things, and you will see things that you haven't seen before."

Responding to questions from reporters and e-mails from viewers, Buffett answered in his typically simple, blunt and occasionally humorous style.

Asked if the current economy is similar to the down economy of 1973-74, Buffett summed up the situation succinctly.

"It's nothing like 73-74 yet, but that doesn't mean it couldn't be," he says.

"In 1973-74, we had stagflation, we had a meltdown in equity prices, really good companies got down to three and four times earnings, and they weren't phony earnings. Nothing like that's happening [now].

"We're seeing more fixed-income-type forced liquidations. We're seeing more indigestion at banks with a lot of loans they don't want to have. So [it's] ... a time of easy money in terms of price, but not so easy in terms of availability."

Although officially the U.S. is not yet in a recession — popularly defined as two consecutive quarters of negative GDP growth — Buffett disagrees.

"By any common sense definition we are in a recession," he says.

"On balance, most people's net worth has been heading south. If you own a house and have an 80 percent mortgage on it and had 20 percent equity, you may not have any equity. Millions of people are in situations somewhat similar to that."

People who own municipal bonds have been similarly hurt, says Buffett, as yields have declined.

Retailing and business in general have also slowed significantly across the board, he observed, citing sales figures from Berkshire Hathaway holdings that come in daily.

Asked if the economy will turn around quickly and how long will this slump last, Buffett declined to make any predictions.

"We don't try to time anything or predict," he says. "We just look for where there's good values and if we find them, we buy them. Nobody knows what the economy is going to look like a year or two years from now."

Current conditions may lead to something more severe, he says, or if we're lucky, it won't.

"I've never made any money on economic forecasting," says Buffett. "I made money by staying out of trouble."