Warren Buffett, the influential American investor, has likened his country’s escalating fiscal woes to “an economic Pearl Harbor”.
The multi-billionaire, who is an informal advisor to President Barack Obama, conceded the economy had approached “close to the worse case” possible. He also warned that recovery would not come quickly.
Acknowledging his own failure to foresee the scale of the crisis, he admitted: “It’s fallen off a cliff. Not only has the economy slowed down but people have really changed their habits like I haven’t seen.”
Mr Buffett, recently ranked the second-richest American by Forbes magazine, said that fear was the greatest cause of damage to the economy, claiming it is now dominating the public’s behaviour to an alarming degree.
“People are confused and scared,” he said.
“People can’t be worried about banks, and a lot of them are.”
Mr Buffett singled out Americans’ failure to predict the severity of home price declines, which he said in turn led to problems with securitizations and other debts tied to the stability of house prices.
He said: “It was like some kids saying the emperor has no clothes, and then after he says that, he says now that the emperor doesn’t have any underwear either.
“We want to err on the side next time of not allowing big institutions to get as unchecked on leverage as we have allowed them to do.”
Mr Buffett also urged consumers to curb their dependence on credit cards.
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