Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street

Chapter 12. Money, Money, Money (Warren and Washington)

	That's the problem . . . you can't regulate it anymore. You can't get the genie back in the bottle.
	--Warren Buffett (in Reuters), May 24, 2008

In the spring of 2008, both Warren and I said the United States was already in a recession. In May 2008, Warren told CNBC that "it will be deeper and last longer than many think."^[384] Yet many economists sound like the Merchants of Death (MOD squad) in Thank You for Smoking: "Although we are constantly exploring the slowdown, there is currently no economic evidence to suggest the economy is in a recession." The classic definition of a recession calls for two consecutive quarters of negative growth, and as of the summer of 2008, the numbers did not yet show it. Election years bring out the best in the economy. In the long run, we need to improve productivity and spend less—I will get to that later. In the short run, Warren is right. The United States is in a recession combined with inflation and low growth, a condition called stagflation.

How did this happen? For most of this century, Washington has pumped money into the economy by keeping interest rates low. Easy money tempts crooks. Speculators and fraudsters had a party. Regulators became enablers. Cheap money fueled bad lending, including predatory lending, and cheap money expanded the housing bubble. There are genuine victims of predatory lending. The war on poverty became a war on the poor. Those victims face crushing debt, a ...