Apr 15, 2009, 08.55 AM IST | Source: CNBC-TV18

'Economic Pearl Harbour' will resolve: Warren Buffett

Thousands upon thousands of emails flooded into CNBC with questions for Warren Buffett. The world’s most famous investor did talk about his view of the economy, on stocks and his thoughts on how Washington is dealing with the financial crisis. He also be shared his solutions to the “economic Pearl Harbor,” as he likened it.

Warren Buffet

Thousands upon thousands of emails flooded into CNBC with questions for Warren Buffett. While all the questions couldn’t be answered, the world’s most famous investor did talk about his view of the economy, on stocks and his thoughts on how Washington is dealing with the financial crisis. He also be shared his solutions to the “economic Pearl Harbor,” as he likened it.

“It's fallen off a cliff, and not only has the economy slowed down a lot, people have really changed their behavior like nothing I've ever seen,” Buffett said.

The American economy, though, will turn around, he added, and that this in the long run will be seen as an aberration. “Everything will be all right. We do have the greatest economic machine that man has ever created,” he said.

“We started with four million people back in 1790 and look where we've come and it wasn't because we were smarter than other people, it wasn't because our land was more fertile or we had more minerals or our climate was more favorable. We had a system that worked. It unleashed the human potential. And we're far from done. So I think your kids will live better than mine, your grandchildren will live better than your kids. There's no question about that. But the machine gets bummed up from time to time. And if you take the bulk of those centuries, probably 15 years were bad years, but we go forward.”

Here is a verbatim transcript of Warren Buffett’s exclusive interview on CNBC. Also watch the accompanying video. 

Q:  Why don't we start off talking right away about the economy? What do you see right now? You spooked a lot of people last week when you talked about how the economy was in tatters and would be there for quite some time.

A: Yes. The economy, ever since we talked in September, we talked about it being an economic Pearl Harbor and what was happening in the financial world would move over to the real world very quickly. It's fallen off a cliff, and not only has the economy slowed down a lot, people have really changed their behavior like nothing I've ever seen.

Luxury goods and that sort of thing have just sort of stopped, and that's why Wal-Mart is doing well and you know, and I won't name the ones that are doing poorly. But there's been a reset in people's minds. And we see that as something like (Berkshire subsidiary) Geico where year after year after year we say you can save some money insuring with Geico. And year after year there have been a certain number of people who have said, `You know, I've got this pal, Rotary Q, and I've been insuring with him and for 100 bucks, why should I shift?'

Every week we're just seeing it build and build. More and more people are calling. Our price differentials haven't widened, our advertising isn't that much different. But the American public really has changed their buying habits. On the reverse side, our jewellery stores just get killed in a period like this. And high-end gets hurt the most, next down gets hurt the second most, and the lowest people get hurt the least.

Q: What's happening? Did this happen more quickly or more severely than even you expected?

A: It certainly happened close to the worst case. I mean, you never know what's going to happen. But I would not have thought there could've been a much worse case than what has happened. Although, I will say this, the Fed did some things in September when it happened that were vital in keeping the place going. If they hadn't have insured money market accounts and, in effect, commercial paper, you and I would be meeting at McDonald's this morning instead.

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