At the Berkshire Hathaway shareholders' meeting held on Saturday, Buffett issued one of his sternest financial warnings to date—this time he is not warning about the stock market or real estate but is directly pointing to the future of the dollar.
Buffett clearly stated that the U.S. government's irresponsible fiscal policy could erode the value of the dollar, stating, "We will not invest in currencies that are likely to depreciate significantly," and pointed out that the current fiscal deficit model in the U.S. is unsustainable.
In response, some commentators stated, "Buffett questioning the dollar is like the Pope questioning the altar. It is only said when something sacred is no longer safe."
It is worth mentioning that 'investment guru' Buffett's every word and action has always been closely watched by the outside world, being referred to as 'The Oracle of Omaha.' Will his prophecy about the dollar come true this time?
"We would not want to hold a currency that is significantly depreciating"
At the shareholders' meeting, when asked about the risks of a weakening dollar, Buffett stated:
"We would not want to hold any currency that we truly believe will significantly depreciate."
"The value of currency can become very frightening when government actions are irresponsible."
"Some things may happen in the U.S. ... that make us want to hold a lot of other currencies. For example, if we invest in a European country ... we might finance a lot with their currency."
Buffett mentioned at the meeting that the U.S. government's fiscal policy is shocking, with more and more policies seemingly undermining the value of the dollar rather than protecting it. Although the dollar remains dominant globally, Buffett explicitly stated that he is looking at other currencies for investment, particularly the yen. He mentioned that Berkshire Hathaway has already increased its investments in the yen as a strategic move.
This rare warning indicates that Buffett is concerned about the prospects of the dollar, especially amid uncertainties in the U.S. economy and trade policies. Buffett has strongly opposed the tariff policies of the Trump administration, calling them "a big mistake" and "acts of war."
As market uncertainty increases, Buffett is adopting a more conservative investment strategy. Berkshire Hathaway has reduced its stock holdings for 10 consecutive quarters, selling $134 billion worth of stocks in 2024 alone, including important holdings like Apple and Bank of America. This indicates that Buffett is preparing for possible macroeconomic turmoil. Currently, Berkshire's cash reserves have reached $347 billion, a record high.
In response, some netizens posted on X, stating that this is not the first time Buffett has expressed concerns about the dollar:
"U.S. fiscal policy scares me"
When asked about potential hedging measures that Berkshire might take, Buffett stated that he would not take actions specifically based on quarterly or annual earnings to manage currency risks. This is because establishing effective checks-and-balances mechanisms within the currency value system is very difficult, and managing currency risk is not easy.
Buffett also expressed concerns that governments tend to make decisions that lead to the depreciation of their currencies:
"In the U.S., fiscal policy is what I truly fear because the way it is formulated and the incentive mechanisms drive people to do many things that could potentially lead to currency issues. This phenomenon is not limited to the U.S.; it is the same worldwide."
"The value of currency is concerning, and the existing mechanisms do not effectively address these issues."
"All the motivations are pushing some behaviors that could, and indeed do, cause trouble regarding currency issues. But this is not limited to the U.S.; many places around the world experience this. In some places, this situation often spirals out of control."
Buffett's remarks also echo his statements in the Berkshire annual report:
"If fiscal folly prevails, the value of paper money could evaporate in an instant. In some countries, such reckless practices have become the norm, and in our country's not-so-long history, the U.S. has also come close to such an edge. Fixed-rate bonds offer no protection against significant currency depreciation."
When discussing the late Vice Chairman Charlie Munger, Buffett said, "Charlie always believed that if he had to choose an investment area outside of stocks, he felt he could make a lot of money in the foreign exchange market." However, Buffett also revealed, "We tried it once. I can't say we won't do it again, but the likelihood is low. Unless something happens in the U.S. that makes us willing to hold a lot of other countries' currencies."
The U.S. fiscal deficit model is unsustainable
When asked about his views on the efficiency department led by Musk (DOGE) and whether it is beneficial or detrimental to the long-term interests of the U.S., Buffett immediately quipped, "This question is difficult to answer." He stated that the bureaucratic system of the government has always been a confusing issue. In a capitalist market, many bureaucratic structures can "infect" other areas, leading to inefficiency spreading.
In fact, many systems could be managed better; even within Berkshire, there is space to streamline and improve efficiency.
But the government is just the government. It lacks a true 'superior' to oversee it, which makes people uneasy about the future governance and fiscal situation, especially when elected officials say one thing and do another.
Buffett believes that if political figures have money but lack credibility, that is a very negative signal. In terms of fiscal policy, the U.S. has long failed to truly address the issue of fiscal deficits, which has never been a thoroughly resolved topic.
As for the U.S., our fiscal deficit is no longer a sustainable model. Whether in two years or twenty years, we cannot rely on this unsustainable mechanism forever.
Sometimes you know that something cannot last, but you don’t know how to stop it—eventually, you can only throw your hands up in defeat.
In the past, it was Paul Volcker who helped the U.S. avoid the worst inflation collapse. Today, the inflation issue in the U.S. is already serious, and we have also experienced the consequences of such policies.
Buffett stated that he does not wish to take on the role of fixing the fiscal system and balancing revenues and expenditures, but it is a job that must be done. However, it seems that Congress is not truly addressing this issue right now.
Our country has the most innovative talent in the world, but we also do have many structural problems. If something goes wrong, these problems won't explode immediately, but they will definitely ferment slowly. There are indeed incentive and checks-and-balances mechanisms in governance. Just like in a company, even the most successful companies cannot be without issues.