Berkshire Hathaway CEO Warren Buffett’s comments at the company’s shareholders’ meeting blew away the nonsense about “some temporary inflation” coming from Fed chair Jay Powell and Treasury Secretary Janet Yellen.
Answering a question at the meeting, Buffett – whose firm has many portfolio companies which are in the physical economy – said, “We’re raising prices. People are raising prices to us. And it’s being accepted.” That means it is not temporary. “We really do a lot of housing,” he continued. “The costs are just up, up, up. Steel costs, you know, just every day, they’re going up. And there hasn’t yet been — the wage stuff follows. I mean, the UAW writes a three-year contract, we got a three-year contract. But if you’re buying steel at General Motors or someplace, you’re paying more every day.”
Emphasizing the duration of the inflationary pressure, Buffett said, “It just won’t stop. People have money in their pocket, and they pay the higher prices. And when corporate prices go up in a month or two — and that was the price increase for April 1 — our costs are going up, supply chain’s all screwed up for all kinds of people. But it’s a buy — it’s almost a buying frenzy, except certain areas, you can’t buy at all…. But it is not a price-sensitive economy right now in the least. And I don’t know exactly how — what shows up in different price indices. But there’s more inflation going on than — quite a bit more inflation going on than people would have anticipated just six months ago or thereabouts.”
Concerning all the money “people” are spending in Buffett’s view, the U.S. government provided one-third of all personal income of Americans, from the richest to the poorest, in the past year. This was shown in transfer and personal income data included in the release, April 29, of the estimate of GDP for the first quarter. In the year from March 2020 to March 2021, Americans’ total personal income exclusive of transfers from the federal government, incredibly lopsided as that income was, totaled $16 trillion, and government transfers were $8.1 trillion. In the year from March 2019 to March 2020, personal income without transfers was also $16 trillion, and government transfers were just $3.1 trillion. Thus despite the tremendous gains on stock and other financial markets for those households that own such financial assets, the impoverishment during the pandemic of those who don’t own them caused total personal income to be unchanged.
And Treasury borrowing and distribution of trillions provided one-third of all income.
