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Buffett: America's Growing Trade Deficit Is Selling the Nation Out from Under Us [pdf] (2003)

81 points by yeknoda 1y ago

BJones12 1y ago
(2003)
tromp 1y ago
The salient part: > The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur. > We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties—either exporters abroad or importers here—wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.
- Sytten 1y ago
  I am not sure this would haves worked since the return of the US stock market was quite high (due to that constant influx of foreign investment notably) compared to any other asset for people/businesses that wanted to invest their profit. Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.
  - rayiner 1y ago
    > Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy. What if the Dollar weren't the world's reserve currency, either due to deliberate policy by the U.S., or the inevitable fact that the U.S. economy will shrink as a share of the world's economy as India and China develop?
    - raincom 1y ago
      If the USD ceases being the reserve currency, inflation goes up. Fed's neutral rate of interest 2% = the floor of inflation rate. For the third world countries, the natural interest rate = Fed's interest rate (or American inflation rate) + the local inflation rate. That's why third world countries pay more interest rate s in their own currencies; that's why they want to borrow in USD.
- CharlieDigital 1y ago
  If I understand this correctly, it would effectively be the same mechanism as carbon offset credits where carbon emitters can purchase credits from entities working to reduce carbon emissions. I think that there could be some downsides to this because the US exports a lot of agricultural goods which are already subsidized as it is.
- wat10000 1y ago
  This is basically introducing a second US currency and mandating that it must be used for international trade. Having different currencies for internal vs external trade isn’t usually something I associate with prosperous countries.
  - deleted 1y ago
    [deleted]
- shipp02 1y ago
  I don't know if strict import control is a good idea. Look up license raj in India. It also added a lot of opportunities for corruption.
  - graemep 1y ago
    Yes, but that was because it was a license based system and a lot less transparent than the IC idea.
ComputerGuru 1y ago
The important part is that this doesn’t seek to force a zero trade deficit on a per-country basis. Imagine insisting Cambodia has to buy as much US goods (taking into account the type of goods the US exports) as US companies import from Cambodian factories.
- ein0p 1y ago
  Buffett's suggestion, while elegant, would require that Congress passes legislation on this, which there's zero percent chance that it would, in its present state.
  - leereeves 1y ago
    I fear that Congress will be unable to pass anything that isn't a budget resolution for the foreseeable future. The filibuster rule requires bipartisan agreement to implement any proposed policy, and neither party wants to give an administration from the other party any kind of win. Perversely, the better the idea, the less likely it is to pass Congress. Better idea -> it will be successful -> it will be popular -> the administration will benefit politically -> the other party will oppose it -> it won't get 60 votes in the Senate -> it won't become law
    - matthewdgreen 1y ago
      I see the current situation as essentially the best ad for “Congress” (however slow or ineffectual) that one could write.
  - margalabargala 1y ago
    The current state of the government is that Congress has tacitly ceded their power to the President. They are allowing him to do things that generally would not be permitted with out Congressional approval, because the majority is aligned with him anyway. An intelligent or competent leader who had the power currently enjoyed by the President would be able to implement the system suggested by Buffet, and it would likely see less opposition than the current tariffs have.
Luc 1y ago
Paper with some simulations and a tweaked version of Buffett's idea: https://www.levyinstitute.org/pubs/wp_538.pdf https://www.levyinstitute.org/pubs/wp_538.pdf
rayiner 1y ago
Interesting point. I hadn't thought of it this way before: > But imagine that the Japanese both want to get out of their U.S. real estate and entirely away from dollar assets. They can’t accomplish that by selling their real estate to Americans, because they will get paid in dollars. And if they sell their real estate to non-Americans—say, the French, for euros—the property will remain in the hands of foreigners. With either kind of sale, the dollar assets held by the rest of the world will not (except for any concurrent shift in the price of the dollar) have changed. > The bottom line is that other nations simply can’t disinvest in the U.S. unless they, as a universe, buy more goods and services from us than we buy from them. That state of affairs would be called an American trade surplus, and we don’t have one. > But under any realistic view of things, our huge trade deficit guarantees that the rest of the world must not only hold the American assets it owns but consistently add to them. And that’s why, of course, our national net worth is gradually shifting away from our shores.
- Fade_Dance 1y ago
  It works the other way as well. Ex: exporting dollars solidifies a bid for US debt (because by far the easiest way to use excess dollars is to buy US treasuries), which allows the US to keep easily exporting dollars. When capital flows to the US are sustainably strong, the dollar performs well (which is amplified from being the reserve currency for international trade), which means foreign capital is incentivzed to join the bandwagon (strong dollar + strong US assets performance = great returns for international participants). It's self reinforcing to the upside, and it's theoretically somewhat self-reinforcing if it unwinds as well.
JumpinJack_Cash 1y ago
This whole balancing the trade deficit is utopia. I will just give a small example using black leather jackets. Black leather jackets are indestructible, you can spill any sort of fluid on them, try to light them on fire (they won't catch fire) throw them in the dirt etc. They never go out of style either, there is basically no reason why an adult should own more than one black leather jacket. Now think of how many black leather jackets do you own. See? People have to find within themselves the will to stop their consumerism , not with this sort of central planning idiocy. And it's not granted that doing away with consumerism is desirable either. Like for example Trump's impact on American society was much better when he was buying planes, yachts, supercars and foreign models than what it has become of him now that he has stopped pursuing those things.
- twic 1y ago
  > Now think of how many black leather jackets do you own. None. I don't really understand this analogy.
- bongodongobob 1y ago
  I've never owned a black leather jacket and I don't think I know anyone who does.
throw0101d 1y ago
That's from 2003. In a more recent interview in March 2025: > Asked about how tariffs will affect the economy, Buffett stated, "Tariffs are actually, we've had a lot of experience with them. They're an act of war, to some degree." > I asked, "How do you think tariffs will impact inflation?" > "Over time, they are a tax on goods. I mean, the Tooth Fairy doesn't pay 'em!" he laughed. "And then what? You always have to ask that question in economics. You always say, 'And then what?'" * https://www.cbsnews.com/news/warren-buffett-on-legendary-washington-post-publisher-katharine-graham/ https://www.cbsnews.com/news/warren-buffett-on-legendary-was...
- rayiner 1y ago
  > That's from 2003. Would you argue that the period between 2003 and 2025 have strengthened or weakened the case for free trade?
  - tekla 1y ago
    Strengthened. People really fucking hate rising prices.
  - throw0101d 1y ago
    > Would you argue that the period between 2003 and 2025 have strengthened or weakened the case for free trade? For the US specifically, various considerations: * https://twitter.com/ArmandDoma/status/1908189982789095677#m https://twitter.com/ArmandDoma/status/1908189982789095677#m * https://www.csis.org/analysis/do-not-blame-trade-decline-manufacturing-jobs https://www.csis.org/analysis/do-not-blame-trade-decline-man... * https://archive.is/https://www.wsj.com/opinion/free-trade-didnt-kill-the-middle-class-data-manufacturing-protectionism-policy-22d20f83 https://archive.is/https://www.wsj.com/opinion/free-trade-di... * https://www.noahpinion.blog/p/when-are-tariffs-good https://www.noahpinion.blog/p/when-are-tariffs-good * https://www.noahpinion.blog/p/manufacturing-is-a-war-now https://www.noahpinion.blog/p/manufacturing-is-a-war-now
  - twoodfin 1y ago
    Strengthened. In the US this has happened: https://fred.stlouisfed.org/series/MEPAINUSA646N https://fred.stlouisfed.org/series/MEPAINUSA646N https://fred.stlouisfed.org/series/DSPIC96 https://fred.stlouisfed.org/series/DSPIC96 Meanwhile across the entire world this has happened: https://ourworldindata.org/history-of-poverty-data-appendix https://ourworldindata.org/history-of-poverty-data-appendix You can argue the growth of globalization & lowering of trade barriers were unrelated to this up-and-to-the-right, but it’s hard to argue they’re making things worse unless you really scope down to particular losers in a world of mostly winners.
paxys 1y ago
Buffett has been aggressive selling stock in the last year ($134 billion total in 2024) and Berkshire is right now sitting on $334 billion cash vs $272 billion in equities. Kinda funny because he's the first one who will tell you "don't time the market", but he definitely timed it to perfection. "Be fearful when others are greedy and greedy when others are fearful".
- itsthecourier 1y ago
  he says so because he is able to do it with some good degree of accuracy and knows how hard it is
- mbac32768 1y ago
  > Kinda funny because he's the first one who will tell you "don't time the market", but he definitely timed it to perfection. I don't know if he's specifically said this but I think a more accurate picture of his view is "unless you're an idiot savant like me whose skill for this would be useless at any other point in history, don't try to time the markets".
  - wetpaws 1y ago
    [dead]
- watwut 1y ago
  He is against tariffs in 2025 as executed by Donald Trump, openly.
- bongodongobob 1y ago
  Well Trump was favored to win by a decent margin months before the elections and he's doing exactly what he said he'd do. I pulled a lot of money out last fall. This wasn't that hard to predict. The hard part is how far down is the bottom.
- Calwestjobs 1y ago
  so he is sitting on 334 billion? that is almost Buffets "USA net ownership balance in 1980" - 360 billion. from that 2003 document... ;)
rib3ye 1y ago
Original discussion https://news.ycombinator.com/item?id=43579908 https://news.ycombinator.com/item?id=43579908
deleted 1y ago
[deleted]
ChrisArchitect 1y ago
[dupe] (2003) Discussion a few days ago: https://news.ycombinator.com/item?id=43579908 https://news.ycombinator.com/item?id=43579908
api 1y ago
I don't agree with how it's being done -- it makes Biden's Afghanistan exit look well planned and executed -- but the trade stuff is one of the few areas where I have some overlap with MAGA. My preferred approach would be more careful, gradual, selective, and, well, well-executed, but it's very clear that blanket free trade with no standards and no reciprocity has hollowed out the country. I mean... if we are going to have the EPA and environmental standards, then it stands to reason that we must tax imports from countries that do not. Otherwise we are just moving the pollution elsewhere while burning even more fuel to ship products here. Right? It kind of shows that a lot of environmentalism is just NIMBY-motivated. It's fine if we trash other peoples' back yards. But a lot of our big environmental problems are global, so not only is this hypocrisy but it doesn't work. It's good that we have workers' rights and OSHA, but the same logic applies. Otherwise we are just exploiting workers elsewhere. On a somewhat tangent... I find it kind of disturbing that the one area where I have some agreement with MAGA is the least popular and most roundly criticized MAGA policy, and the one most likely to result in an electoral defeat. Most of the other stuff in MAGA -- isolationism, a love for strongman rule (at home and elsewhere), authoritarianism, cults of personality, misogyny, racism, etc. -- is stuff that I find horrific, but the only thing people really care about is short term economic outcomes.
- matthewdgreen 1y ago
  The Biden administration spent a lot of time and money trying to bring back manufacturing to US shores, including loads of funding in the IRA for industries like renewable energy and batteries and the CHIPS act for semiconductors. They also used tariffs to protect a number of US industries, but they did it intelligently and in a targeted manner. Being “in favor of some trade restrictions and reindustrialization” does not mean you’re taking a MAGA position. It means you just haven’t been paying much attention to policy, and so you’re basing your ideas of the political options on superficial crap. The result of uninformed citizenry is stuff like what’s happening right now, with the markets going into free fall.
  - api 1y ago
    I agreed with that, though not entirely with how it was done, but they didn't take credit for it. Very few people even knew it was happening. Objectively I don't think Biden was a bad president, and no I didn't vote for Trump. They also never took a principled stand on it. Biden and Harris never said "the trade policy of Reagan and Clinton was a mistake and we are reversing it." If Harris had said that, she would have flipped Michigan and Wisconsin and maybe Ohio. With one sentence. Throw in "the Iraq war was a mistake, and while I support Ukraine we need to make sure we don't repeat the mistakes of the past" and she might have flipped a few more. If that's at all what Harris thinks, then the Democratic Party has an enormous communication problem. They don't know how to connect and they don't claim their wins. They sound like their whole communication agenda is set by consultants and PR people, because it is, and when people hear that they dismiss it as bullshit because everything consultants and PR people say is bullshit. That communication style is a huge contrarian indicator. When people hear a press release they tune out. The right has learned how to talk to people. Or rather, they've un-learned the communication playbook of the latter half of the 20th century. That's why they're winning. I knew Harris was going to lose when she skipped Rogan for SNL. I'm not a big Rogan fan (he's gone way downhill since his early years) but he's how you reach people today. Nobody cares about SNL. I think a good first step would be to start listening to people like AOC -- not necessarily about all her policy views but about how she communicates. She communicates like a 21st century politician, not like someone from 1980.
fbn79 1y ago
Any form of protectionism in the long run affects the efficiency of companies and the quality of products. Even Reagan understood this. The response of nations to US tariffs should be to try to eliminate even more tariffs towards other nations and create new free trade zones.
Calwestjobs 1y ago
What buffet said is exactly what USA did to United Kingdom with brexit. Which companies "enabled it". Which companies got fined for brexit? Facebook AND Cambridge Analytica did and did. Look what for example Cargill UK "assets" were before brexit and what they are now. Yes sounds like conspiracy theory, but point is most other comments here do not seem to understand that economic war is constant, permanent, global. and wars do need more then one party to be war. in economic war all participants are either attacking or they stop to exist. And USA IS attacker, because it still exists. globalism means you plunder from longitude 0-10 then you plunder from longitude 10-20... until you are biting your own ass. or russia will stop you at longitude 28, because russia enslaved / robbed their own people so much that there is nothing to extract. so do you want for USA to rob its own citizens or do you want USA to rob other parts of the world. or we can globally change economic model and start being sustainable?
- Calwestjobs 1y ago
  only relevant part of buffets document is that "why foreigners cant ditch US dollars part"
rib3ye 1y ago
I see many comments here saying “but stock market went up” while ignoring the bare bone problem Buffett is presenting: Disproportionate foreign ownership of US assets harms American sovereignty. The issue may be that sovereignty is hard to measure, but I think we have been complaining about the long-tail effects for a while: - wealth inequality (as businesses become optimized on foreign labor, execs are paid more and workers less) - job security (volatility for investor class means sudden job cuts or offshoring) - asset inflation in real estate (no one can afford a freakin house) - WAR (we have an obligation to defend our debt owners in the Middle East) Every time the public trust gets violated, we lose a small piece of our future.
- tim333 1y ago
  In theory but compared with 2003 when that was written I'd say American sovereignty has increased. In Europe and most places we buy from Amazon, search with Google, the computers run Windows or MacOS, the phones run US software etc. It's more the US owning abroad than abroad owning the US.
  - deleted 1y ago
    [deleted]
legitster 1y ago
The big prediction that was wrong is that the US dollar would lose value. The opposite happened - despite all the deficit trading, the dollar has gone up in relations to all other countries. It's a self-correcting problem - if the dollar starts losing value, that strengthens or our ability to export. And if countries want to manipulate their currency to maintain their ability to export, then they are helping pay to maintain the balance.
jpcookie 1y ago
[dead]
BrickFingers 1y ago
This was a great read. Can someone explain how this translates for average American citizens? What have been the effects, if any, of consistently trading at a deficit since the 80s? I've been trying to wrap my head around it, but it seems like there are so many factors at play that the effects aren't obvious. My intuition is that maintaining trade deficits could cause inflation since US often needs to print money to service its debts. But, that only depends on consistent budget deficits. Inflation also depends on Fed rate somehow...Do consistent deficits increase housing prices? I'm lost.. I hardly know anything about econ. But, my gut feeling is that the effects of 40 years of trade deficits should be clearer than they are. It feels like maybe the status quo has been artificially propped up.
tim333 1y ago
While I'm a fan of Buffett, as he himself says macroeconomics isn't his speciality. One issue with the story is he suggests the people selling America stuff, say China end up accumulating American land and owning the country but it's not what generally happens in practice. In practice foreigners tend to end up either with US dollar debt, which tends to inflate away, or equity in US companies, of which YCombinator and similar churn out hundreds of new ones each year. Another thing is foreigners may end up buying some US real estate but the likes of Amazon ends up taking over much of the worlds retail industry as local shops close around the globe. For reasons like this it's probably not worth worrying too much about the deficit and leaving it to market forces to figure out.
- margalabargala 1y ago
  Depends what region of the country you are in. In much of the western US, especially Arizona, there are enormous farms growing water-intensive crops, in particular alfalfa. These farms are owned by assorted entities in the Middle East, and the crops are shipped overseas. This is an enormous problem. The Colorado River basin is already over-allocated and there is not enough water to go around. But due to how water rights work, any entity can purchase an open-ended amount of our already endangered water supply and do as they please with it. At this moment it isn't a critical problem, because we do have enough other agriculture and water to support ourselves. But with the direction the climate is heading, eventually we will have a drought of such severity that the water used by those farms makes or breaks us. During the Great Famine in Ireland, the island consistently produced more than enough food to feed its citizens; it was all simply sent overseas.
lr1970 1y ago
In this 2003 article Warren Buffett proposed a clever mechanism of ICs (Import Certificates) instead of blunt tariffs to deal with trade imbalance. IC is a "soft" control variable that effectively transfers money from importers to exporters and helps to balance the trade. I wish POTUS implemented such a mechanism instead of blanket tariffs that have huge blast radius.

81 points by yeknoda 1y ago

(2003)

The salient part: > The time to halt this trading of assets for consumables is now, and I have a plan to suggest for getting it done. My remedy may sound gimmicky, and in truth it is a tariff called by another name. But this is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars. This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur. > We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties—either exporters abroad or importers here—wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.

Sytten 1y ago
I am not sure this would haves worked since the return of the US stock market was quite high (due to that constant influx of foreign investment notably) compared to any other asset for people/businesses that wanted to invest their profit. Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy.
- rayiner 1y ago
  > Also due to the reserve nature of the USD the dollar and international trade mostly done in USD there is a huge demand for dollars keeping it strong compared to other currencies. This fundamentally is at odd with an export driven economy. What if the Dollar weren't the world's reserve currency, either due to deliberate policy by the U.S., or the inevitable fact that the U.S. economy will shrink as a share of the world's economy as India and China develop?
  - raincom 1y ago
    If the USD ceases being the reserve currency, inflation goes up. Fed's neutral rate of interest 2% = the floor of inflation rate. For the third world countries, the natural interest rate = Fed's interest rate (or American inflation rate) + the local inflation rate. That's why third world countries pay more interest rate s in their own currencies; that's why they want to borrow in USD.
CharlieDigital 1y ago
If I understand this correctly, it would effectively be the same mechanism as carbon offset credits where carbon emitters can purchase credits from entities working to reduce carbon emissions. I think that there could be some downsides to this because the US exports a lot of agricultural goods which are already subsidized as it is.
wat10000 1y ago
This is basically introducing a second US currency and mandating that it must be used for international trade. Having different currencies for internal vs external trade isn’t usually something I associate with prosperous countries.
- deleted 1y ago
  [deleted]
shipp02 1y ago
I don't know if strict import control is a good idea. Look up license raj in India. It also added a lot of opportunities for corruption.
- graemep 1y ago
  Yes, but that was because it was a license based system and a lot less transparent than the IC idea.

ComputerGuru 1y ago

The important part is that this doesn’t seek to force a zero trade deficit on a per-country basis. Imagine insisting Cambodia has to buy as much US goods (taking into account the type of goods the US exports) as US companies import from Cambodian factories.

ein0p 1y ago
Buffett's suggestion, while elegant, would require that Congress passes legislation on this, which there's zero percent chance that it would, in its present state.
- leereeves 1y ago
  I fear that Congress will be unable to pass anything that isn't a budget resolution for the foreseeable future. The filibuster rule requires bipartisan agreement to implement any proposed policy, and neither party wants to give an administration from the other party any kind of win. Perversely, the better the idea, the less likely it is to pass Congress. Better idea -> it will be successful -> it will be popular -> the administration will benefit politically -> the other party will oppose it -> it won't get 60 votes in the Senate -> it won't become law
  - matthewdgreen 1y ago
    I see the current situation as essentially the best ad for “Congress” (however slow or ineffectual) that one could write.
- margalabargala 1y ago
  The current state of the government is that Congress has tacitly ceded their power to the President. They are allowing him to do things that generally would not be permitted with out Congressional approval, because the majority is aligned with him anyway. An intelligent or competent leader who had the power currently enjoyed by the President would be able to implement the system suggested by Buffet, and it would likely see less opposition than the current tariffs have.

Luc 1y ago

Paper with some simulations and a tweaked version of Buffett's idea: https://www.levyinstitute.org/pubs/wp_538.pdf https://www.levyinstitute.org/pubs/wp_538.pdf

rayiner 1y ago

Interesting point. I hadn't thought of it this way before: > But imagine that the Japanese both want to get out of their U.S. real estate and entirely away from dollar assets. They can’t accomplish that by selling their real estate to Americans, because they will get paid in dollars. And if they sell their real estate to non-Americans—say, the French, for euros—the property will remain in the hands of foreigners. With either kind of sale, the dollar assets held by the rest of the world will not (except for any concurrent shift in the price of the dollar) have changed. > The bottom line is that other nations simply can’t disinvest in the U.S. unless they, as a universe, buy more goods and services from us than we buy from them. That state of affairs would be called an American trade surplus, and we don’t have one. > But under any realistic view of things, our huge trade deficit guarantees that the rest of the world must not only hold the American assets it owns but consistently add to them. And that’s why, of course, our national net worth is gradually shifting away from our shores.

Fade_Dance 1y ago
It works the other way as well. Ex: exporting dollars solidifies a bid for US debt (because by far the easiest way to use excess dollars is to buy US treasuries), which allows the US to keep easily exporting dollars. When capital flows to the US are sustainably strong, the dollar performs well (which is amplified from being the reserve currency for international trade), which means foreign capital is incentivzed to join the bandwagon (strong dollar + strong US assets performance = great returns for international participants). It's self reinforcing to the upside, and it's theoretically somewhat self-reinforcing if it unwinds as well.

JumpinJack_Cash 1y ago

This whole balancing the trade deficit is utopia. I will just give a small example using black leather jackets. Black leather jackets are indestructible, you can spill any sort of fluid on them, try to light them on fire (they won't catch fire) throw them in the dirt etc. They never go out of style either, there is basically no reason why an adult should own more than one black leather jacket. Now think of how many black leather jackets do you own. See? People have to find within themselves the will to stop their consumerism , not with this sort of central planning idiocy. And it's not granted that doing away with consumerism is desirable either. Like for example Trump's impact on American society was much better when he was buying planes, yachts, supercars and foreign models than what it has become of him now that he has stopped pursuing those things.

twic 1y ago
> Now think of how many black leather jackets do you own. None. I don't really understand this analogy.
bongodongobob 1y ago
I've never owned a black leather jacket and I don't think I know anyone who does.

throw0101d 1y ago

That's from 2003. In a more recent interview in March 2025: > Asked about how tariffs will affect the economy, Buffett stated, "Tariffs are actually, we've had a lot of experience with them. They're an act of war, to some degree." > I asked, "How do you think tariffs will impact inflation?" > "Over time, they are a tax on goods. I mean, the Tooth Fairy doesn't pay 'em!" he laughed. "And then what? You always have to ask that question in economics. You always say, 'And then what?'" * https://www.cbsnews.com/news/warren-buffett-on-legendary-washington-post-publisher-katharine-graham/ https://www.cbsnews.com/news/warren-buffett-on-legendary-was...

rayiner 1y ago
> That's from 2003. Would you argue that the period between 2003 and 2025 have strengthened or weakened the case for free trade?
- tekla 1y ago
  Strengthened. People really fucking hate rising prices.
- throw0101d 1y ago
  > Would you argue that the period between 2003 and 2025 have strengthened or weakened the case for free trade? For the US specifically, various considerations: * https://twitter.com/ArmandDoma/status/1908189982789095677#m https://twitter.com/ArmandDoma/status/1908189982789095677#m * https://www.csis.org/analysis/do-not-blame-trade-decline-manufacturing-jobs https://www.csis.org/analysis/do-not-blame-trade-decline-man... * https://archive.is/https://www.wsj.com/opinion/free-trade-didnt-kill-the-middle-class-data-manufacturing-protectionism-policy-22d20f83 https://archive.is/https://www.wsj.com/opinion/free-trade-di... * https://www.noahpinion.blog/p/when-are-tariffs-good https://www.noahpinion.blog/p/when-are-tariffs-good * https://www.noahpinion.blog/p/manufacturing-is-a-war-now https://www.noahpinion.blog/p/manufacturing-is-a-war-now
- twoodfin 1y ago
  Strengthened. In the US this has happened: https://fred.stlouisfed.org/series/MEPAINUSA646N https://fred.stlouisfed.org/series/MEPAINUSA646N https://fred.stlouisfed.org/series/DSPIC96 https://fred.stlouisfed.org/series/DSPIC96 Meanwhile across the entire world this has happened: https://ourworldindata.org/history-of-poverty-data-appendix https://ourworldindata.org/history-of-poverty-data-appendix You can argue the growth of globalization & lowering of trade barriers were unrelated to this up-and-to-the-right, but it’s hard to argue they’re making things worse unless you really scope down to particular losers in a world of mostly winners.

paxys 1y ago

Buffett has been aggressive selling stock in the last year ($134 billion total in 2024) and Berkshire is right now sitting on $334 billion cash vs $272 billion in equities. Kinda funny because he's the first one who will tell you "don't time the market", but he definitely timed it to perfection. "Be fearful when others are greedy and greedy when others are fearful".

itsthecourier 1y ago
he says so because he is able to do it with some good degree of accuracy and knows how hard it is
mbac32768 1y ago
> Kinda funny because he's the first one who will tell you "don't time the market", but he definitely timed it to perfection. I don't know if he's specifically said this but I think a more accurate picture of his view is "unless you're an idiot savant like me whose skill for this would be useless at any other point in history, don't try to time the markets".
- wetpaws 1y ago
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watwut 1y ago
He is against tariffs in 2025 as executed by Donald Trump, openly.
bongodongobob 1y ago
Well Trump was favored to win by a decent margin months before the elections and he's doing exactly what he said he'd do. I pulled a lot of money out last fall. This wasn't that hard to predict. The hard part is how far down is the bottom.
Calwestjobs 1y ago
so he is sitting on 334 billion? that is almost Buffets "USA net ownership balance in 1980" - 360 billion. from that 2003 document... ;)

rib3ye 1y ago

Original discussion https://news.ycombinator.com/item?id=43579908 https://news.ycombinator.com/item?id=43579908

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ChrisArchitect 1y ago

[dupe] (2003) Discussion a few days ago: https://news.ycombinator.com/item?id=43579908 https://news.ycombinator.com/item?id=43579908

api 1y ago

I don't agree with how it's being done -- it makes Biden's Afghanistan exit look well planned and executed -- but the trade stuff is one of the few areas where I have some overlap with MAGA. My preferred approach would be more careful, gradual, selective, and, well, well-executed, but it's very clear that blanket free trade with no standards and no reciprocity has hollowed out the country. I mean... if we are going to have the EPA and environmental standards, then it stands to reason that we must tax imports from countries that do not. Otherwise we are just moving the pollution elsewhere while burning even more fuel to ship products here. Right? It kind of shows that a lot of environmentalism is just NIMBY-motivated. It's fine if we trash other peoples' back yards. But a lot of our big environmental problems are global, so not only is this hypocrisy but it doesn't work. It's good that we have workers' rights and OSHA, but the same logic applies. Otherwise we are just exploiting workers elsewhere. On a somewhat tangent... I find it kind of disturbing that the one area where I have some agreement with MAGA is the least popular and most roundly criticized MAGA policy, and the one most likely to result in an electoral defeat. Most of the other stuff in MAGA -- isolationism, a love for strongman rule (at home and elsewhere), authoritarianism, cults of personality, misogyny, racism, etc. -- is stuff that I find horrific, but the only thing people really care about is short term economic outcomes.

matthewdgreen 1y ago
The Biden administration spent a lot of time and money trying to bring back manufacturing to US shores, including loads of funding in the IRA for industries like renewable energy and batteries and the CHIPS act for semiconductors. They also used tariffs to protect a number of US industries, but they did it intelligently and in a targeted manner. Being “in favor of some trade restrictions and reindustrialization” does not mean you’re taking a MAGA position. It means you just haven’t been paying much attention to policy, and so you’re basing your ideas of the political options on superficial crap. The result of uninformed citizenry is stuff like what’s happening right now, with the markets going into free fall.
- api 1y ago
  I agreed with that, though not entirely with how it was done, but they didn't take credit for it. Very few people even knew it was happening. Objectively I don't think Biden was a bad president, and no I didn't vote for Trump. They also never took a principled stand on it. Biden and Harris never said "the trade policy of Reagan and Clinton was a mistake and we are reversing it." If Harris had said that, she would have flipped Michigan and Wisconsin and maybe Ohio. With one sentence. Throw in "the Iraq war was a mistake, and while I support Ukraine we need to make sure we don't repeat the mistakes of the past" and she might have flipped a few more. If that's at all what Harris thinks, then the Democratic Party has an enormous communication problem. They don't know how to connect and they don't claim their wins. They sound like their whole communication agenda is set by consultants and PR people, because it is, and when people hear that they dismiss it as bullshit because everything consultants and PR people say is bullshit. That communication style is a huge contrarian indicator. When people hear a press release they tune out. The right has learned how to talk to people. Or rather, they've un-learned the communication playbook of the latter half of the 20th century. That's why they're winning. I knew Harris was going to lose when she skipped Rogan for SNL. I'm not a big Rogan fan (he's gone way downhill since his early years) but he's how you reach people today. Nobody cares about SNL. I think a good first step would be to start listening to people like AOC -- not necessarily about all her policy views but about how she communicates. She communicates like a 21st century politician, not like someone from 1980.

fbn79 1y ago

Any form of protectionism in the long run affects the efficiency of companies and the quality of products. Even Reagan understood this. The response of nations to US tariffs should be to try to eliminate even more tariffs towards other nations and create new free trade zones.

Calwestjobs 1y ago

What buffet said is exactly what USA did to United Kingdom with brexit. Which companies "enabled it". Which companies got fined for brexit? Facebook AND Cambridge Analytica did and did. Look what for example Cargill UK "assets" were before brexit and what they are now. Yes sounds like conspiracy theory, but point is most other comments here do not seem to understand that economic war is constant, permanent, global. and wars do need more then one party to be war. in economic war all participants are either attacking or they stop to exist. And USA IS attacker, because it still exists. globalism means you plunder from longitude 0-10 then you plunder from longitude 10-20... until you are biting your own ass. or russia will stop you at longitude 28, because russia enslaved / robbed their own people so much that there is nothing to extract. so do you want for USA to rob its own citizens or do you want USA to rob other parts of the world. or we can globally change economic model and start being sustainable?

Calwestjobs 1y ago
only relevant part of buffets document is that "why foreigners cant ditch US dollars part"

rib3ye 1y ago

I see many comments here saying “but stock market went up” while ignoring the bare bone problem Buffett is presenting: Disproportionate foreign ownership of US assets harms American sovereignty. The issue may be that sovereignty is hard to measure, but I think we have been complaining about the long-tail effects for a while: - wealth inequality (as businesses become optimized on foreign labor, execs are paid more and workers less) - job security (volatility for investor class means sudden job cuts or offshoring) - asset inflation in real estate (no one can afford a freakin house) - WAR (we have an obligation to defend our debt owners in the Middle East) Every time the public trust gets violated, we lose a small piece of our future.

tim333 1y ago
In theory but compared with 2003 when that was written I'd say American sovereignty has increased. In Europe and most places we buy from Amazon, search with Google, the computers run Windows or MacOS, the phones run US software etc. It's more the US owning abroad than abroad owning the US.
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legitster 1y ago

The big prediction that was wrong is that the US dollar would lose value. The opposite happened - despite all the deficit trading, the dollar has gone up in relations to all other countries. It's a self-correcting problem - if the dollar starts losing value, that strengthens or our ability to export. And if countries want to manipulate their currency to maintain their ability to export, then they are helping pay to maintain the balance.

jpcookie 1y ago

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BrickFingers 1y ago

This was a great read. Can someone explain how this translates for average American citizens? What have been the effects, if any, of consistently trading at a deficit since the 80s? I've been trying to wrap my head around it, but it seems like there are so many factors at play that the effects aren't obvious. My intuition is that maintaining trade deficits could cause inflation since US often needs to print money to service its debts. But, that only depends on consistent budget deficits. Inflation also depends on Fed rate somehow...Do consistent deficits increase housing prices? I'm lost.. I hardly know anything about econ. But, my gut feeling is that the effects of 40 years of trade deficits should be clearer than they are. It feels like maybe the status quo has been artificially propped up.

tim333 1y ago

While I'm a fan of Buffett, as he himself says macroeconomics isn't his speciality. One issue with the story is he suggests the people selling America stuff, say China end up accumulating American land and owning the country but it's not what generally happens in practice. In practice foreigners tend to end up either with US dollar debt, which tends to inflate away, or equity in US companies, of which YCombinator and similar churn out hundreds of new ones each year. Another thing is foreigners may end up buying some US real estate but the likes of Amazon ends up taking over much of the worlds retail industry as local shops close around the globe. For reasons like this it's probably not worth worrying too much about the deficit and leaving it to market forces to figure out.

margalabargala 1y ago
Depends what region of the country you are in. In much of the western US, especially Arizona, there are enormous farms growing water-intensive crops, in particular alfalfa. These farms are owned by assorted entities in the Middle East, and the crops are shipped overseas. This is an enormous problem. The Colorado River basin is already over-allocated and there is not enough water to go around. But due to how water rights work, any entity can purchase an open-ended amount of our already endangered water supply and do as they please with it. At this moment it isn't a critical problem, because we do have enough other agriculture and water to support ourselves. But with the direction the climate is heading, eventually we will have a drought of such severity that the water used by those farms makes or breaks us. During the Great Famine in Ireland, the island consistently produced more than enough food to feed its citizens; it was all simply sent overseas.

lr1970 1y ago

In this 2003 article Warren Buffett proposed a clever mechanism of ICs (Import Certificates) instead of blunt tariffs to deal with trade imbalance. IC is a "soft" control variable that effectively transfers money from importers to exporters and helps to balance the trade. I wish POTUS implemented such a mechanism instead of blanket tariffs that have huge blast radius.