Warren Buffett: Debt limit is a ‘political weapon of mass destruction’

October 17, 2013 Leave a comment

Warren Buffett: Debt limit is a ‘political weapon of mass destruction’

By Jim Puzzanghera

October 16, 2013, 6:13 a.m.

WASHINGTON — Billionaire investor Warren Buffett on Wednesday called the U.S. debt limit a “political weapon of mass destruction” and said both political parties should pledge never to use it as leverage because of the financial damage it can cause. As lawmakers and the White House scrambled to raise the $16.7-trillion debt limit before a Thursday deadline, Buffett said it would be “asinine” for the U.S. to risk its hard-won reputation for paying its bills on time.“There are certain weapons that are just improper to use against humanity,” he told CNBC. “It is a political weapon of mass destruction and both sides should say we’re not going to touch it,  just like with poison gas or nuclear weapons. It’s too powerful.”

Buffett is among many well-known executives who have called for Congress and President Obama to solve their differences and increase the debt limit or risk chaos in world financial markets.

Treasury Secretary Jacob J. Lew has said the U.S. will run out of borrowing authority if the debt limit is not raised by Thursday, putting the nation at risk of default.

Echoing those concerns, Fitch Ratings on Tuesday put the U.S. AAA credit rating on watch for a downgrade because of a fiscal standoff that also has partially closed the federal government since Oct. 1.

The Treasury should still be able to pay all the nation’s bills into early next week, officials estimate.

But analysts warned the risk of default rises each day if the debt limit is not raised by the deadline, because the Treasury will have to depend on about $30 billion cash on hand and the flow of incoming tax revenues to make payments.

Buffett said he’s not worried that interest and principal on government bonds won’t eventually be paid, and that he believes a deal will be struck before the deadline.

He said his concern is for the U.S. reputation as a credit-worthy nation. The dollar is the world’s reserve currency.

“I’m worried about damage to … an asset that we’ve carefully cultivated for 237 years,” he said.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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