The Greenback Effect

The Greenback Effect

New York Times Op-Ed by Warren Buffett – August 19, 2009

Buffett describes the scope of the debt in a historical context and the three ways we can pay for it; borrow from foreigners, borrow from our citizens, or print money. John Maynard Keynes is quoted as saying, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens . . . The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” The primary focus of the article is the purchasing power of currency.

Currency valuation is notoriously difficult to predict; it is likely the hardest prediction to make so we’re not going to spend any time trying to figure out the timing or the level. We just need to be aware of the consequences of devaluation.



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