Buffett Bearish on Dollar, Blames Banks for Credit Mess

Bloomberg and the Telegraph report on a speech made by Warren Buffett in Toronto. He sees the dollar falling over the next decade unless policies change, has harsh words for the financial services industry, and says there is plenty of credit available. The last bit sounds troublingly at odds with facts, until you realize he is speaking from his own viewpoint. If you are one of the few true AAAs still standing, money is pretty cheap.

From Bloomberg:

The only currency Berkshire directly owns now is the Brazilian real, Buffett said. He blamed the declining dollar on the current account deficit, with the U.S. trade imbalance playing the largest role.

“If something is unsustainable, it’s going to have consequences; so far the consequences have been a general decline in the dollar against major currencies,” Buffett said. “If we continue the same policies, we’re going to get the same results in the next five or 10 years.”

From the Telegraph:

Mr Buffett, known as the “Sage of Omaha” for his investment record, suggested that the banking fraternity has only itself to blame for its recent problems which have seen banks write off more than $130bn (£66.3bn) so far.

“It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,” Mr Buffett said, making reference to the American soft drink…..

“I wouldn’t quite call it a credit crunch,” he said. “Money is available, and it’s really quite cheap because of the lowering of rates that has taken place.”

However, he said what had taken place was “a re-pricing of risk,” leading to an “unavailability of what I might call ‘dumb money’, of which there was plenty around a year ago.”

The problem is that important sectors of the economy, in particular the housing market, became dependent on dumb money.