Is Warren Buffett Beautiful?

Historical Stock, Securities, Certificates, Fund, Bonds

Is Warren Buffett beautiful? He certainly is at least when compared to the usual beauty contest contenders like Bill Gross or Jeff Gundlach who typically flock to these occasions. Here we are in reflation again, so interest rates must have nowhere to go but up. Therefore, it follows, bonds are in for a world of hurt all because inflation is being let loose by a government no longer constrained by any sense of proportion.

The argument, at least, is as ancient as Buffett. One need look no further than the man’s father, Howard, who represented Nebraska in the House of Representatives in four non-consecutive terms beginning in 1943. A thorough critic of FDR’s New Deal, today he’d be classified as an inflationista and gold bug.

In May 1948, as the US consumer price index scorched upward to a better than 9% annual rate, Congressman Buffett wrote about what he saw as the inflationary aspects of a government whose payroll had reached 14,416,393 (FY 1947), up from 2,196,151 (FY 1932). And World War II was already several years finished by this time.

The natural check on such excesses hadn’t just been blunted, these had been obliterated entirely (gold confiscation). And they weren’t bond vigilantes, according to Howard, so much as aspirants to monetary soundness:

Before 1933 the people themselves had an effective way to demand economy. Before 1933, whenever the people became disturbed over Federal spending, they could go to the banks, redeem their paper currency in gold, and wait for common sense to return to Washington.

The disaster of paper money would ruin first the bonds then the currency before finishing the nation, he said. In so doing, Buffett the father would claim something Buffett, his son, would reiterate under similar circumstances in the far distant future.

I can find no evidence to support a hope that our fiat paper money venture will fare better ultimately than such experiments in other lands. Because of our economic strength the paper money disease here may take many years to run its course. But we can be approaching the critical stage.

The US never did, of course. In fact, the CPI’s spasm then already settling down was never more than it, and very quickly the economy and the supply-side inflation chokepoints dissipated leaving the baseline once more exposed. As for the dollar and government bonds, both equally supported by the deflationary characteristics still overwhelming even if leftover from a Great Depression by then almost an entire decade into history. See Yield Cap History Is Rock Solid, Just Not At All In The Way They Are Telling You

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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