* This post was written in 2011 before Mr. Roche founded Monetary Realism, which was formed due to several disagreements Mr. Roche and many other former MMT proponents had with the school of thought. For more info on the difference in views please see here. For more on MR’s views please see here.
In the Q&A today Mr. Buffett responded to the idea of a debt crisis in the USA (CNBC reports):
Warren Buffett says if Congress fails to raise the U.S. debt limit, it would be its “most asinine act” ever.But he told shareholders today there’s “no chance” lawmakers will fail to do so, despite “waste of time” debates on Capitol Hill.
While Buffett doesn’t want the nation to keep increasing its debt relative to GDP, he says there’s shouldn’t be a legislated debt limit to begin with, because circumstances change.
Buffett says the U.S. will not “have a debt crisis of any kind as long as we keep issuing our notes in our own currency.” Inflation resulting from a “printing press” approach, however, is a serious threat.
If that sounds familiar then you’ve likely been reading this website and the work of other MMTers. I have hammered on politicians and this nonsensical idea of a “debt ceiling”. For years now I have focused on the fact that Greece is not our endgame, but that hyperinflation is the animal we need to combat. This weekend’s “Woodstock for Capitalists” isn’t the first time Warren Buffett has sounded a bit like an MMTer. Back in March I cited an article where he made similar comments:
Let’s talk about the macro-economy; a lot of people are concerned, with U.S. debt at about $15 trillion – you are still very optimistic about America. How do you reconcile this?
“America and a lot of other countries too are remarkably resilient. I mean, we make all kinds of mistakes in our country and we will continue to make them. But we are a country that has gone through a civil war, a country that has gone through 15 recessions, a great depression a flu epidemic, a cold war.
“There are always problems, but there are always opportunities, the thing that really counts is having 309 million people or so with a great number of them trying to make their lives better and the lives of people around them better.
But today foreigners have a bigger claim on this pie. Compared with the past 10-20 years, foreigners hold more equity, and more stock and more debt of America.
“Foreigners across the world have about a $3 trillion net balance against the United States. There was a time when we had a net balance against the rest of the world. It’s better not to have a $3 trillion balance, but we also have about a $60 trillion economy – we can handle it.
“I don’t like policies that lead to that number increasing and I have written about it, but let’s not get into that. Everything that we have is denominated in our own currency, and that’s a tremendous advantage.” (emphasis added)
I know Mr. Buffett spends quite a bit of time on-line playing bridge, but it is beginning to sound like he also spends some of his time reading the work of MMTers. In other words, it sounds like Buffett actually understands the way a modern fiat monetary system actually works.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.