Buffett: US Default Is a 'Political Weapon of Mass Destruction'

Wednesday, 16 Oct 2013 07:40 AM

By Newsmax Wires

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Warren Buffett, chairman and chief executive of Berkshire Hathaway, said Wednesday that the threat of not raising the U.S. debt ceiling is a "political weapon" and a "pure act of idiocy."

The idea that Congress could fail to raise the $16.7 trillion U.S. borrowing limit is a "political weapon of mass destruction," Buffett told cable television network CNBC.

Buffett said he thinks it would be absurd for American politicians to do anything to damage the country's reputation for paying its bills that has been established over the past 237 years.

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"I know it's been used in the past, but we used the atomic bomb back in 1945 but we decided we weren't going to do something like that again," he said.  "There are plenty of weapons that can be used," such as filibusters, he said.

Buffett says it would be idiocy and "asinine" for the nation's leaders to allow the United States to default on its bills. Buffett says he doesn't think the federal government will fail to pay its bills, but "if it does happen, it's a pure act of idiocy."

Congressional leaders were still working Wednesday morning on a deal to end the partial government shutdown and prevent default. U.S. Treasury Secretary Jack Lew has said the United States will exhaust its borrowing authority no later than October 17.

"Credit worthiness is like virginity, it can be preserved but not restored very easily, so it is crazy to play around with it," Buffett said.

But Buffett said he hasn't changed Berkshire's spending because of the budget battle, and it didn't factor in his decision to complete a $1.1 billion acquisition.

Berkshire said Wednesday it will buy the beverage dispenser business from Britain's IMI PLC on behalf of its Marmon Group subsidiary. "I wouldn't have changed the price a penny based on what's happened," Buffett said.

The deal is relatively small by Berkshire's standards. The company spent $12.25 billion earlier this year to acquire half of ketchup maker H.J. Heinz Co. in a $23.3 billion deal. Buffett said Wednesday that another similar-sized deal recently got away from Berkshire.

Buffett also said he hasn't yet seen an effect on consumer spending in the reports he gets from Berkshire subsidiaries like its furniture and jewelry stores, but that would change if the government defaults.

Buffett said he hasn't sold off any of Berkshire's short-term treasury bills because of the budget battle. He said he's not worried about the government paying those.

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And he hasn't yet seen an effect on consumer spending in the reports he gets from Berkshire subsidiaries like its furniture and jewelry stores, but that would change if the government defaults.

Buffett also said that his firm's spending rate this year, particularly in reference to acquisitions, is as "high as ever," and that his firm missed an "elephant" acquisition recently that would have exceeded $12 billion.

While discussing his firm's investments in Bank of America Corp and JPMorgan Chase & Co, Buffett said "the banks are in the best shape I can remember."

Regarding his stake in International Business Machines Corp, Buffett said he felt "fine" about his firm's investment in the company and has bought some additional shares this year.

"I do not think companies should be run primarily to please Wall Street and largely shareholders who are going to sell. I believe in running Berkshire for the shareholders who are going to stay and not for the ones who are going to leave," he added.

Berkshire Hathaway Inc. owns about 80 subsidiaries, including clothing, brick, carpet and paint firms. Its insurance and utility businesses typically account for more than half of the company's net income.

It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co

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