At the annual event of the investment community, Warren Buffett, the 93-year-old stock god, once again demonstrated his foresight and keen insight.
One investor asked with concern a thought-provoking question: Given that the US Treasuries are already six times larger than they were before the 2008 financial crisis, is there a danger to the rapid expansion of debt?
Faced with this rather controversial issue, Buffett calmly responded.
The head of Berkshire Hathaway believes that US Treasuries will remain widely accepted and recognized by the market for the foreseeable future.
There are three reasons for this: first, there is a lack of more attractive investment options in the market other than government bonds, second, the global economic environment threatened by inflation makes government bonds more reliable, and third, the status of the US dollar as an international reserve currency is also an important factor affecting the attractiveness of government bonds.
Therefore, in absolute terms, the size of the US Treasury is not too large.
Warren Buffett put it bluntly: "The problem is not that the size of the national debt itself poses a threat to the financial system, but that inflation and the future value of the dollar affect the system as a whole." "
The real concern of the stock market is the future direction of the fiscal deficit.
He evokes memories of the inflationary pressures of the late '70s and early '80s, when then-Fed Chairman Paul Volcker had to act on death threats to curb runaway inflation.
Although Jerome Powell, the current chairman of the Federal Reserve, is a very intelligent figure, he is not alone in the financial system and decision-making of the United States.
The continued expansion of the fiscal deficit will undoubtedly exacerbate inflationary pressures, thus posing a threat to the value of the dollar, which is where Buffett is most worried.
Every investor present was in awe of Buffett's foresight.
But at the same time, this year's Berkshire shareholder meeting also lacked a heavyweight - Buffett's old partner Charlie Munger.
The 99-year-old legend passed away in November last year, which undoubtedly left everyone present with a lot of emotion.
Munger has been with Warren Buffett since 1959, and the unparalleled friendship and trust that the two have forged is one of the secrets of Berkshire's great success.
Munger's keen insight, wise qualities and humorous rhetoric add to the charm of the annual shareholders' meeting.
Now, the death of this fighter makes it difficult for people to hide their thoughts about him, and even Buffett himself is inevitably sad.
However, Buffett admits that Munger's spirit will always be with Berkshire, and the friendship and trust they built between them will always be remembered.
Today, despite Munger's absence, Berkshire will continue to sail through the wind and waves under the leadership of Warren Buffett and the company's two vice chairmen, Greg Abel and Ajit Jain.
When asked whether there is a risk to the size of U.S. Treasuries, Buffett adheres to his usual macro thinking.
As an investment guru with a unique insight into the general trend of the economy, he makes it clear that the absolute size of debt is not the crux of the problem, but the impact of inflation and fiscal deficits on the value of the dollar.
From this perspective, the surge in the size of the national debt reflects a deeper problem – fiscal imbalances.
If there is a long-term imbalance in the fiscal balance, the government will have to continue to issue bonds to raise funds, triggering a debt bubble, and deficit-driven fiscal spending will exert inflationary pressures and depreciate the value of the dollar. This vicious circle will greatly undermine the stability of the financial system.
Therefore, Buffett believes that regulating and controlling the expansion of fiscal deficits is the fundamental strategy, rather than focusing too much on the absolute size of the national debt itself.
Blindly depressing bond issuance will not solve the root cause of the problem, but may lead to other knock-on effects, such as a slowdown in the supply of funds.
On the contrary, the government should focus on optimizing the structure of fiscal expenditure, reducing unnecessary expenditure, and increasing tax collection to control the expansion of the fiscal deficit.
There is no doubt that financial management is an arduous and complex system project, which requires decision-makers to have foresight and superb execution.
But as Warren Buffett has shown, only by truly addressing the root cause of the problem can the risk be fundamentally resolved.