Does Buffett believe, as some have speculated, that the financial markets are about to collapse and that gold and silver would not be much help in feeding people?
February 26, 2013, 10:05 EST
Warren Buffett is arguably the most sophisticated investor in the world. He is certainly at the top in the US. When Microsoft boss Bill Gates first agreed to meet him, he allocated a mere 20 minutes for Buffett. After the two started talking, Gates set aside all other appointments and spoke to Buffett for four hours.
So what should one make of Buffett’s purchase of food producer H J Heinz for $28 billion that some financial experts have described as overpriced? Why would a shrewd investor like Buffett go for beans rather than gold and silver as most others have and are still doing at a time when the prices of these precious metals have hit the stratosphere? This is a question that is being vigorously discussed among financial gurus.
Does Buffett believe, as some have speculated, that the financial markets are about to collapse and that gold and silver would not be much help in feeding people? After all, you can’t eat metal and while silver has some industrial uses, there is no practical use for gold except as a hedge against inflation but we are dealing with a radically different financial situation in the US. Should the financial system collapse, people will be forced into barter trade. Given the geographical size of the United States, transportation would grind to a halt. If food cannot be transported from one part of the country—the producing part—to the other—the consuming part—people will be forced into local barter deals and subsistence farming. Food would become extremely precious. Survival will take precedence over every other consideration.
The deep cuts US President Barack Obama has just announced and the hostile reaction from some governors—Bobby Jindal of Louisiana, for instance—point to the moment of truth hitting home. The entire capitalist system, of which the US is the leading proponent, is based on smoke and mirrors. As long as the west was able to rob other people’s resources without paying a heavy price, the west basked in the glory of capitalism’s triumph. Over the last decade, this robbery has been made quite expensive as witnessed in Afghanistan and Iraq. Instead of robbing others (under whatever pretext), the twin wars have bankrupted America and much of Europe. Their currencies and economies are collapsing. Unemployment has soared, housing markets have collapsed and there is little prospect of recovery any time soon, politicians’ high sounding rhetoric notwithstanding.
Buffett’s decision to acquire J J Heinz, the food company that produces and markets beans, is seen as a vote of no confidence in the US financial system. In the event of collapse, food will be the only acceptable means of exchange. Buffett’s move appears shrewd at a time of growing uncertainty.
There are other pointers as well. Obama has given himself vast new powers to kill Americans based on what he perceives as a threat to US national security. The rapidly expanding fleet of drones over US skies spying on everyone and everything, the intrusive monitoring of the internet as well as curtailment of guns all point to the fact that Americans may be on the verge of rising up against their government. While there are far too many guns in the US and the 16,000 to 20,000 people killed by guns are far too many, curtailment of weapons has a more sinister purpose as well. Some people have even speculated that the Newtown tragedy was the work of several people, not a lone nut, and that it was intended to create the environment to clamp down on guns.
There are other indicators also worthy of attention. The US government has forced all banks, big and small, to make what are called ‘Last Bank Will’. Some have already come into effect; others will be implemented by June 2013. What this means that in the event of depositors making a run on the bank to withdraw their own money, the US government will step in and take over the bank. The depositors’ money will be gone under the pretext of the US government preventing damage to the US financial system!
Taken together in the context of the above-described scenarios, Buffett’s move begins to make sense. He has billions to spare but what can an average American, Canadian or European do? Most may end up starving when the apocalypse does occur.
Scary times indeed!