It's good to be a billionaire, not least when you're betting against the national currency. Warren Buffett disclosed on the weekend that he's continuing to make a -- gulp -- $21 billion dollar bet that the U.S. dollar will decline in value, despite having lost $310 million on that gamble in the first quarter of this year as the dollar rose. [Warren Buffett]
The Berkshire Hathaway Chairman is at least putting his money where his policy convictions are, since for years he's been among those predicting that the greenback will plunge due to the "twin deficits" in the U.S. trade and budget accounts. And he said he'd make an even bigger bet against the buck if not for the caution of his long-time business partner, Vice Chairman Charles Munger.
There's nothing wrong with betting that the dollar will fall, unless of course you lose money -- in which case Berkshire Hathaway shareholders might object. Mr. Buffett is a legendary stock picker, though as an economic policy analyst he's somewhat less prescient. He vigorously opposed the 2003 tax cuts that have been so vital to the current expansion and to stock prices, for example.
Our own view is that currency markets are influenced far more by monetary policy than by the twin deficits, and that the dollar's recovery of late is due to the Federal Reserve's monetary tightening. But Mr. Buffett is playing with his own company's money, and as a billionaire he can afford to lose it.
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