Warren Buffet states the obvious

Today Warren Buffet took out an ad in the New York Times ( http://www.cnbc.com/id/32473352) and proceeded to tell us about the unintended consequences of preventing a financial collapse due to government involvement.

He says that the billions of dollars borrowed by the Federal Government is justified but that we need to be careful because this policy is inherently inflationary.

Memo to Warren Buffet: No shit!

Oh as an aside, his greatest is fear is that when the time comes politicians will lack the political will to put the brakes on to prevent inflation. I believe that is a given, oil is back up to $72/bbl today and I believe the market is pricing in this complete lack of backbone because supply and demand do not justify this price.

The 12 trillion dollar question is when does the deflationary cycle end and when does the inflationary cycle start?

Perhaps he would have been better off explaining the liquidity traps of the fractional reserve banking system. Until the Federal Government side steps these flooding the market with money will not happen, all that will happen is a balance sheet transfer. The Federal Government will sidestep the liquidity trap when people start demand jobs and civil unrest becomes a real possibility, I am sure this is the time when they will develop the backbone to hike interest rates to 25% and reduce liquidity.

I saw it presented this way earlier.....

Deflation = Default on sovereign debt = We're Screwed.
Inflation = Monetization of sovereign debt = We're Screwed.

Pick your poison