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Buffett Weighs In On Economy

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The Associated Press

Published: March 10, 2009

OMAHA, Neb. - Billionaire Warren Buffett said unemployment likely will climb much higher, depending on how effective the nation's policies are, but he remains optimistic about the long run.

Buffett said the nation's leaders need to support President Barack Obama's efforts to repair the economy because fear is dominating Americans' behavior and the economy basically has followed the worst-case scenario he envisioned.

"It's fallen off a cliff," Buffett said Monday during a live appearance on cable network CNBC. "Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen."

Buffett said the changes are reflected in the results of Berkshire Hathaway Inc.'s subsidiaries. He said Berkshire's jewelry companies have suffered, but more people have been willing to switch to Geico to save money on car insurance. The three-hour interview aired from another Berkshire subsidiary that has been hampered by the economy, the Nebraska Furniture Mart store in Omaha.

He predicted that unemployment will climb before the recession is done, but he reiterated his optimistic long-term view: "Everything will be all right. We do have the greatest economic machine that man has ever created."

Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said.

The efforts to help revive the economy are likely to produce inflation that could be worse than what the country suffered through in the late 1970s, Buffett said.

But even though the nation will have to pay for current policies with future inflation, Buffett said, the U.S. government still needs to act.

"We're in a big war, and we're going to use money to fight it," he said.

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