2011 年 Charlie Rose：Warren Buffett

Warren Buffett

Friday 09/30/2011

https://charlierose.com/videos/13532

On the 20th anniversary of the show, Warren Buffett, president of Berkshire Hathaway, talks about buying back his stock and his announcement that the ultra-rich should pay higher taxes.

Charlie Rose: Over the 20 years there have been no guests that have been more interesting and more eagerly anticipated than Warren Buffett. His is a fascinating story. His is a name that is known throughout the world for his extraordinary success as an investor and the parallel success of his company, Berkshire Hathaway. He has been in the news recently because he made a major investment in Bank of America. He also announced a stock buyback of Berkshire Hathaway shares. Perhaps the sharpest focus recently has been on his announcement that wealthy people should pay for taxes. President Obama was certainly listening because he included it in his list of tax law recommendations. He called it the "Buffett Rule". Warren Buffett is in New York and we're pleased to have him at this table not only because he has been such a wonderful guest for us, but also because he is a friend of mine. Welcome.

Warren Buffett: Thank you, Charlie.

Charlie Rose: You've announced recently you're going to buy back, or started the process of buying back Berkshire Hathaway shares. Some people were surprised because you had written in your stockholders letter, which is now famous, "I don't do that."

Warren Buffett: Well, I haven't said that. I have said that you should bu back your shares only when you think they're selling at a discount to their intrinsic value. And since intrinsic value is not a precise figure, it's a guess.

Charlie Rose: Part of the reason you said that was because you don't necessarily think that people buy back shares simply to improve the stock performance.

Warren Buffett: Sometimes they are trying to prop their stock. Sometimes they're -- who knows what their motivations are. There's only one motivation for me. If I think I'm buying our businesses at a discount, I think then it helps all the shareholders. Now I also think you should tell the people before you do that. Just like if you are my partner, and I want to buy -- you want to sell out, if I think I'm buying it from you too cheap I ought to tell you that. Now with the stock exchange it sets the price. And every now and then -- it happened about 10 or 11 years ago, I thought Berkshire Hathaway stock was selling demonstrably below the value of its businesses. And we announced we were going to possibly do it 10 or 11 years ago and then the stock went up right --

Charlie Rose: Right -- so you didn't do it.

Warren Buffett: But this time, if the market is weak, we could buy a lot of stock. But what I say is we'll buy the stock if we think we are doing a favor for the people who are staying in the boat.

Charlie Rose: Because you think intrinsic value of your businesses, those that make up Berkshire Hathaway is undervalued.

Warren Buffett: It's higher than the price. It's clearly higher than the price. I mean it's not a precise figure but it's clearly higher than the price.

Charlie Rose: You offered book value plus 10 percent.

Warren Buffett: I said that is the limit of what we will pay. The market will determine what we pay. Yes. So I mean if the market tanked, you know, next week we'll say, Berkshire could be a lot cheaper than that. And you know, I'm not propping the price in any way. But I'm just setting the outer limits of what we will pay. Because above that, I probably still think it's cheap but I don't-- I want to be demonstrably cheap. I want to be doing the shareholders a favor by buying -- the shareholders who remain a favor by buying in the stock, that they are getting.

Charlie Rose: So you have what, $47 billion to $50 billion of cash.

Warren Buffett: It's down some. We've spent some, Charlie. But we have plenty of cash we'll put it that way.

Charlie Rose: Is there a limit of how much you always want to have in reserve --

Warren Buffett: Yes.

Charlie Rose: -- in case an incredible opportunity comes up and you can go do it.

Warren Buffett: Yes. We won't go below $20 billion in consolidated cash.

Charlie Rose: Cash, yes. So you could be prepared it to spend more than

Warren Buffett: Yes. $20 billion to buy back your stock. We can spend a lot of money depending on how long -- over how long a period because we're earning money all the time. And as we earn money, the money comes in. There's no time limit on it, there is no dollar amount limit on it. There is this limit in terms of valuation and there is this limit in terms of maintaining a given level of cash.

Charlie Rose: It is said that some people think that the asset value of Berkshire Hathaway is close to $130 to $150 a share for the Class A stock.

Warren Buffett: Yes, closer to $130,000.

Charlie Rose: Right. Of course, $130,000.

Warren Buffett: I don't know what the number is. I know it's -- I know it's more than 110 percent of the book. I mean we've got some wonderful businesses. We're got some that aren't so wonderful. But some of the big ones, particularly are really very, very good businesses. And they're worth a lot more than they were when we bought them.

Charlie Rose: Why don't you sell those that are not so wonderful.

Warren Buffett: I just don't do it. I don't do it. If I have ten kids, one of them is a little slow -- I'm not going to put him up for adoption.

Charlie Rose: So that is the way you feel about these businesses.

Warren Buffett: I do. Unless they promise to have permanent losses over time or unless they have major labor problems and I put that in my annual report for 30 years. I just, people come to me to sell their business to me. They work hard for me after they sell their businesses, you know. Everything doesn't work out perfectly in life. And I'm not about to dump somebody because, you know, it's If it is a disaster, we have to get out of it. sub-par.

Charlie Rose: This is a signal from the Sage of Omaha that there are not a lot of investment opportunities out there.

Warren Buffett: Well, both segments are wrong. We actually -- we got the paperwork cleared, I guess, just yesterday morning.

Charlie Rose: So the process is --

Warren Buffett: So we actually bought some shares. Now whether we buy a lot of shares or not will depend on the price. But we intend to buy shares, if the parameters we laid out are correct. It has nothing to do with what-- you know, if I live to be 100 and keep my marbles, I hope I'm still around.

Charlie Rose: Well, in fact, in the last quarter didn't you spend about $4 billion on stock -- common stock?

Warren Buffett: No. In this, actually, yes, September 30th being the current quarter. The third quarter we spent a net of $4 billion, roughly.

Charlie Rose: And it's been about $8 billion so far this year in terms of --

Warren Buffett: That's about right.

Charlie Rose: -- of buying common stock.

Warren Buffett: That's almost exactly right.

Charlie Rose: Which suggests you are buying stock because you believe in America and you believe in these companies and you believe --

Warren Buffett: They are American companies. And they do business, some, a fair amount abroad but they are American companies. And incidentally, we are investing $7 billion --

Charlie Rose: You make that point. In terms of infrastructure and --

Warren Buffett: When we buy stock, our own stock back, we're intensifying our interest in a whole bunch of mostly American companies. Our shareholders will own a greater percentage BNSF, (INAUDIBLE), a greater percentage of Geico if we buy back shares. The pie will be as big but there won't be as many slices.

Charlie Rose: Here is what George Soros told CNBC last week. That he said, "Rather than the U.S. slipping into recession sometimes in the future, I think we are already in it." Michael Spence and Paul Krugman said there was 50 percent chance of another recession. You don't buy that.

Warren Buffett: I don't buy it. I'm looking at 70 some companies and I will tell you that a railroad carried 193,000 cars last week. And I can tell you in terms of caddie sales and jewelry sales -- we've got three different jewelry operations, four different furniture operations.

Charlie Rose: They're all up.

Warren Buffett: Yes, they're not galloping but there has been no downturn. There has been no downturn, you know. Except I told you before, home construction is flat on its rear.

Charlie Rose: When is it going to turn around?

Warren Buffett: It's going turn around when we've created enough more households than houses that the inventory of houses gets down to --

Charlie Rose: Is there a magical way to do that, to create more inventory than --

Warren Buffett: Well, the way to do it is to hold down creation of new houses. We have about 500,000 plus housing starts going on, that counts apartments as well.

Charlie Rose: So the way to do it is stop the supply and limit the supply.

Warren Buffett: If we create more households than houses, we will bring the inventory into balance. I don't know when but we did just the opposite six or seven years ago. We created more houses than household. Surprise, we had too many houses. It is really, it is really a question of supply and demand. And we created too many houses relative to households. A few years back, now we're creating more households every day than we are houses and we will come back into balance. I don't know when that will be. But when it happens, you know, when we get back to a million units a year, or something like that, I think will you see unemployment rates drop significantly.

Charlie Rose: Perhaps down to 6 percent.

Warren Buffett: Yes.

Charlie Rose: And you will see the full economic recovery at that time.

Warren Buffett: You will see -- you'll certainly see something very close -- much closer to it.

Charlie Rose: Do you believe it will get back to where it was prior to 2008?

Warren Buffett: Well, to some extent --

Charlie Rose: Both economic growth and --

Warren Buffett: We had an unsustainable binge because we were creating -- among other things creating too many houses and selling them to people without couldn't pay for them and all of that. So we were-- we were in the bar drinking, you know. I'm not sure we want to go all the way back in but we want to get over the hangover.

Charlie Rose: But at the same time you recently made a significant investment in Bank of America.

Warren Buffett: Correct.

Charlie Rose: And some say that part of the reason that they are having a difficult time is because of the amount of the mortgage lending that they are responsible for.

Warren Buffett: They made a lot of mistakes during the binge as did a number of other financial institutions. You know, including the two run by the federal government, Fannie Mae and Freddie Mac. But they made mistakes. You know, I made mistakes. And the present management is paying the price and unwinding some of the sins of a previous management. And that takes a lot of time. And it's not done yet and it will take them a lot of time. But that doesn't bother me.

Charlie Rose: No.

Warren Buffett: You know, that's just part of business. You do some dumb things and then you work your way out of them.

Charlie Rose: Time has been your best friend, hasn't it?

Warren Buffett: Well, time, yes, right. I try to, you know, Geico got in trouble in the mid-70s. American Express got in trouble in the mid-60s. Those are two of the greatest investments I've ever had. And you had to look out five or ten years and say-- and that's what you have to do with the economy, incidentally. I mean we have a wonderful economy in the United States over time. And it will come back just like Geico came back, American Express came back. Bank of America worked its way through its troubles. It will be painful. There will be lots of headlines for a long time. You can't do it in three months or six months. But you have a fellow working at it. He didn't create the problems; he's working on solving them.

Charlie Rose: Brian Moynihan.

Warren Buffett: Yes, Brian Moynihan and you have a very, very fine business underneath.

Charlie Rose: One of the arguments between Republicans and Democrats in this upcoming political battle is going to be the balance between spending cuts which help treat (ph) deficit in part and a growth strategy that builds towards a future. How do you figure out where you ought to be on that?

Warren Buffett: Well, there's -- we will get growth in the future. I mean you've got American genius, genius of capitalism working, to create growth over time. I mean that is not primarily a function of -- a lot of times they talk about growth when they mean to create inflation. And so I don't worry about the United States growing per capita GDP over time. We'll have periodic recessions. This was a particularly strong one because it was a particularly wild binge. I mean it was something and we're paying for it.

Charlie Rose: Do we need something to stimulate the economy to create growth either on the part of the federal government or on the part of the Federal Reserve?

Warren Buffett: Well, we've been stimulating like crazy, you know. We've been running a deficit close to 10 percent in that period of GDP annually. That's a lot of stimulus. I mean it doesn't mean (INAUDIBLE) called the Stimulus Bill. It is stimulus. And we have given monetary policy, you know, we put our foot to the floor and driven interest rates to zero and piled up reserves at the Fed. So --

Charlie Rose: But there is some debate within the Fed as to what might be done and where the focus will be.

Warren Buffett: I don't think that will be too important. I mean the important thing is what the Fed did three years ago. I mean if they played it wrong, then we would be paying a huge price for that. But they've used up most of their bullets. The chairman will probably disagree with me. But in my opinion, monetary policy has been played out about as far as it can. And it's been useful but I don't think there's a lot to be done there that's going to change the course of business recovery.

Charlie Rose: And he thinks there are few things can do that he still has in his --

Warren Buffett: He is doing this operation twist and trying to bring down longer rates. We've got low rates. I mean interest rates are not the problem in the economy now, and short rates are nothing and long rates are pretty darn cheap. So I don't think anything further than that direction is going to have a big impact on the economy.

Charlie Rose: I just talked to some Chinese business people, who were in Washington to meet the Secretary of State and Secretary of Treasury and they came to the table in Washington. And they were a bit worried about inflation in China.

Warren Buffett: Yes, well, you know, they'll have some. And they may have a lot sometime. I mean any economy that, well, look at what we've had over the years. I mean a dollar, when I was born, is worth about 6 cents now. So we've had a lot of inflation, you know, it's something in the area of 15 to 1 since I was born. If you had told my dad that in 1930, I'm not sure he would have had me. I mean he would have thought that the world would come to an end. And things have turned out pretty well. During that same period real GDP per capita has gone up 6 for 1. So I'm against inflation-- I'm for temporary inflation, but when you have a booming economy, you know, you may well get some and sometimes it may get out of control and sometimes you have to do something about it. But most of these things aren't the end of the world, Charlie, we always think they are the end of the world. But you know, as I mentioned before when I was born on August 30th, 1930 that was the high date for the Dow for the whole year, 242. It went straight down to 41. I mean my mother must have felt guilty as hell, witnessing what had happened.

Charlie Rose: Little did she know.

Warren Buffett: But you know, 25 percent unemployment, all kinds of things. This country comes back. It came back from, you know, what happened at Pearl Harbor. It comes back from all kinds of things. And it's coming back now.

Charlie Rose: So what role would the "Buffett Rule" play in that coming back?

Warren Buffett: Well, I think that it's very important in terms of -- in terms of getting people to make the kind of sacrifices they're going to face. I mean we're going to be telling people that some of the promises have to be modified. And these are people that don't have lots of margins of safety in their own affairs. They're not like me. They can't just sell a few stocks or something like that, if the payment doesn't come through for this or that. So we're going to be asking the American public as a whole to participate in a belt-tightening when we bring down expenditures from 25 percent of GDP or thereabouts. And I think that when you have a very, very small group of ultra rich people who have incomes of a million dollars or more, who are paying very low rates like I am, 17 percent in my case. But I have a number of friends -- I have talked to a lot of people in the last few months. And a number of them are below my 17 percent even though they are in this -- some of them are in this famous 400 category, their average is $220-some million of income per person. That is some kind of income, isn't it?

Charlie Rose: It is because there have been -- they pay capital gains rate, is that the primary reason?

Warren Buffett: Yes. That is a lot of it.

Charlie Rose: That is 15 percent.

Warren Buffett: Yes, that's the big one but dividends are 15 percent.

Charlie Rose: Right.

Warren Buffett: And they, the ultra rich who are paying really subnormal taxes, and there's a lot of them. But there is a lot of them that aren't.

Charlie Rose: Right.

Warren Buffett: But there are a lot of them that are, I think can best-- I think it's a terrible mistake to ask 300 million Americans to tighten their belt and ignore that group.

Charlie Rose: But here's my point. Is it because of the economic value of doing that per se in terms of the more revenue going into the IRS or is it because the essential fairness of the American system is an important point? If you are asking the population at large, you have to make damn sure they think that the country is operating out of a sense of fairness.

Warren Buffett: Yes. It's both. But it's the second point I think is more important than the first point. Because I would estimate there might be 20, if you put a minimum tax in it would affect a portion of the ultra rich (INAUDIBLE). That might raise $20 billion a year by some rough estimates. I don't think those are crazy estimates. Now $20 billion a year seems like a drop in the bucket when you have a deficit of a trillion or so. But $20 billion a year is still $1,000 each for 20 million families. I mean and you've got to get the revenue someplace. So one way or another, I mean who knows how they are going to ask everybody to sacrifice. But if you have a choice between asking 20 million families to come up with another $1,000 each, or hitting 50,000 or so people who are paying very subnormal taxes, on very large incomes, I would say that, you know, I would rather get the $20 billion from the people that are like me.

Charlie Rose: And when John Boehner says that the President, when he buys this idea is practicing class warfare?

Warren Buffett: Yes, well, the class warfare has been going on. I mean if you look at these 400 top incomes that have gone from $40 million on average per person -- per family up to $200 million, their tax rate has gone from 29 percent and a fraction down to 21 percent so there has been class warfare going on. It's just that my class is winning. And my class isn't just winning, I mean we're killing them. It's been a rout.

Charlie Rose: You've got everything on the board.

Warren Buffett: Well, just look at America today, I mean in terms of the ultra rich. They have not suffered through this. Listen -- and incidentally, if somebody is making $5 million or $10 million dollars a year; $20 million, $30 million dollars a year as a CEO or athlete or whatever it may be, and they're paying the normal tax rate, you know. They are in the mid 30s or something like that. I have become convinced after talking to a lot of the superrich who talk to me about this, that the best way to do it is this minimum tax of making sure that everybody at those levels, million and over, is paying in the mid 30s.

Charlie Rose: How many people will be affected by this, if you use the million-dollar as the point of reference? Because is it everybody that makes more than a million dollars?

Warren Buffett: No.

Charlie Rose: Or is it a select group.

Warren Buffett: No, there are two ways of going at it. One is to do it by rate in which case the whole group would be affected. It would be about 250,000, just raise the thing five points or something like that. I have- - and that's, that's an acceptable way to go at it. I have talked to a lot of very rich people and I think the fairer way of doing it is to take the people that have found ways to bring their rate down to the 15 percent or 17 in my case, some of them I know are below 10, and just have a minimum tax for them. That would hit about 50,000 in my guess. And I don't have any great figures on it, it might be 70,000, it might be 40,000 but it won't be 10,000. It won't be the whole group; might hit 50,000 out of the 250,000. And they would be brought up into the 30s in terms it of their tax rate overall.

Charlie Rose: So what percentage of your income is taxed at 15 percent or 17 percent?

Warren Buffett: A lot.

Charlie Rose: Because you have some ordinary income. You pay yourself $100,000 a year or something like that.

Warren Buffett: Yes. And I have some interest and that sort of thing. But --

Charlie Rose: That's a small percentage of your income.

Warren Buffett: It depends on the year, Charlie. There have been some years -- there were years a few years back, for example, when I made a lot of money out of owning Freddie Mac and Fannie Mae mortgage pass-throughs. And I got a lot of interest income on that but I also ended up making a very large capital gain on it. And incidentally that money had not been taxed before, at some corporate level. I read these arguments about that, and didn't apply at all. I made a lot of money a few years back off a bunch of little Korean stocks -- I may have even mentioned that to you. And those companies did not pay any U.S. income tax.

Charlie Rose: What do you think of this idea that you need to change and have tax reform because if you do companies will start bringing money back in that they're withholding overseas and doing something with it overseas and not bringing it back here because they think they're double taxed.

Warren Buffett: Well, there's -- they would like to be able to repatriate money.

Charlie Rose: Right.

Warren Buffett: That was taxed at very low rates in some various places around the globe some sort of legitimate in terms of where they manufacture, sometimes sort of artificial. And they would like to bring that back as they were allowed to do, I don't know, five or six or seven years ago where there was a one-time repatriation. But we own stock in some of those companies incidentally, that have a lot of money that they would call trapped over there. If they are allowed to bring it back and pay very little tax on it. Where do think they're going to -- they are going to want to keep earning money over there.

Charlie Rose: So you don't think they'll bring it back.

Warren Buffett: Well, I think they'll bring it -- if they were allowed to do it without paying any tax to speak or a 5 percent tax, they can bring it back. But they say that would wonderful, because we would be bringing this money back to the United States --

Charlie Rose: And investing.

Warren Buffett: But what it would mean is it would mean, my God, we can earn a lot of money over there at 5 or 10 percent tax rates, let's keep bringing it back. We ought to keep trying to make more money over there and build more plants over there. So it cuts both ways. It is an incentive, if you come up with a low repatriation rate. It's an incentive for people to try and put more of their production and make more money abroad because that brings down their overall tax rate.

Charlie Rose: Corporate America is sitting on a lot of cash and they say there are a couple of reasons for that. Number one they say it's because of regulations and they don't have confidence in what the stocks, what the tax structure is going to look like. Do you believe that?

Warren Buffett: No. I believe that they can't find good projects that they like and that they don't see the demand for certain things. I'm not going to build more carpet mills or something like that or more brick plants if I don't see where I'm going to sell the carpet or bricks.

Charlie Rose: We're not just talking about people who are tied to the housing industry. We're talking about whole lot of corporations in America that are sitting on a lot of cash and they say they don't have confidence in the future and that's why they do it. And you say what.

Warren Buffett: Well, I've got a lot of confidence. They ought to have confidence. They're earning very good returns in most cases on tangible net assets. American business is doing fine.

Charlie Rose: It could be a lot better off if they were investing money and being able to hire new people.

Warren Buffett: Yes, but they have to find the right projects. And to their credit, I would say that I don't know of any companies that see intelligent things to do with the money whether it's here or abroad, and that have the money that are sitting there and not doing it.

Charlie Rose: Ok, so you are basically saying that the problem with the American economy right now is corporate America which creates private jobs is not seeing a lot of intelligent things to do with the money.

Warren Buffett: Yes, there's a lack of demand.

Charlie Rose: What does that say?

Warren Buffett: Well, Keynes would say it was me. But I haven't -- it can't be -- he would say you got to stimulate a lot more because only government can --

Charlie Rose: Paul Krugman says that.

Warren Buffett: Yes. Right. And they may be right but we've done a lot of that. We've already seen a lot of that. So I -- it would have some effect in my view but I think the efficacy of it, once are you off the stimulus of 10 percent of

Gdp To Start With: Do you think the absence of that kind of demand and intelligent opportunity to spend the money is in part because of the Administration has been in charge that owns this economy now?

Warren Buffett: I think it's -- I think it's a function of coming back from a brutal -- we talked about the patient in the hospital. We had an incredible bubble. I mean it manifested in all kinds of ways. -- focused around housing. I mean, you know, you had $22 trillion in residential housing. At the peak houses were worth that was a huge part of the American public's net worth. So we had a body blow and we are coming back from that. And we will see more things to do.

Charlie Rose: So you are saying you think and you are supporting the President and you had a fund-raising event here in New York because you believe he and his administration have made the right decisions for the economic growth of the country.

Warren Buffett: In general.

Charlie Rose: You see no specific example that was so egregious that you could not the support the President.

Warren Buffett: That's correct. And I will tell you, Charlie, we're making rail cars, this is not BNSF. This is a company called Marman. We make tank cars. We lease them frequently. We're down in Alexandria, Louisiana. I think we've increased production three or four times in the last 12 months. I mean we're employing a lot more people in Alexandria, Louisiana building tank cars then we were a year ago. And it's been step- by-step, it's increasing. We're seeing utilization of cranes in terms of oil fields. But we see it all over --

Charlie Rose: But what makes you different. Because the conventional wisdom is that most of Wall Street that supported the President last time is not supporting the President this time; Jamie Dimon included.

Warren Buffett: Yes, well --

Charlie Rose: These are people who look at the economy, the same economy.

Warren Buffett: Jamie, I don't think Jamie would tell you the economy is not getting better. In fact I think I've seen something where he specifically said --

Charlie Rose: No he has said -- and the bank is getting better and he's happy with the bank.

Warren Buffett: Yes. Right. But he is --

Charlie Rose: But he's not supporting the President as far as we know.

Warren Buffett: We don't know.

Charlie Rose: But a lot of Wall Street, at least you will accept the idea that a lot of people look at the same evidence and say we don't think the stewardship has been so good and we don't believe that the economy is as good as you do. And they think regulation and everything else is part of the mix.

Warren Buffett: Yes, I would say this. Most of them are in businesses that are doing pretty well. They may not be doing as well as in the binge. I mean Wall Street had been doing as well, but you take the number of people making a million dollars or over on Wall Street and you can fill a very large auditorium.

Charlie Rose: Yes. So they're doing well.

Warren Buffett: There are a lot of --

Charlie Rose: But they're not supporting the President, are they.

Warren Buffett: No, they aren't -- I would say -- that's my impression.

Charlie Rose: So what happened? Why have they deserted the President?

Warren Buffett: I think some, there was some rhetoric that contributed to that.

Charlie Rose: Demonizing of business.

Warren Buffett: They felt that. And I think the President felt I got to look at all the things we did for business and they're unappreciative. I'm all that stands between them and the pitchforks.

Charlie Rose: He said that at one meeting.

Warren Buffett: Yes. And so Wall Street certainly doesn't feel loved. And they might like to feel loved.

Charlie Rose: But you don't find that in mainstream America. You don't find that in Omaha. Or you don't find that in --

Warren Buffett: Well, there are people -- there's no question, you know, it was Mayor Cuomo (ph) that said you campaign in poetry and you govern in prose. And if you think about it the whole act of campaigning is raising people's expectations and once you get there you have to bring them down.

Charlie Rose: You essentially are saying that -- you're not disappointed by this President for the most part.

Warren Buffett: No. I agree with that statement. I'm not disappointed, no.

Charlie Rose: Like some --

Warren Buffett: Everybody has --

Charlie Rose: You're like the ones who supported him more loudly, Bowles- Simpson, that kind of thing.

Warren Buffett: Yes. Definitely. And listen, any time you like a president are you not going to feel 100 percent about every single thing they do. I'm sure the shareholders of Berkshire Hathaway don't feel 100 percent about everything I do. It just doesn't work that way in a country with 300 million people. And strong feelings about this issue and that issue --

Charlie Rose: I mean what about this idea that somehow if we had someone who understood business, who had managerial experience in business or managerial experience at all, we would have been in a better place. The decisions would have been different.

Warren Buffett: You know, I don't think-- I think if you take the overall group of decisions, I don't agree with that. I think that sure, a given decision might be better here or there. I mean the decision to make Tim Geithner Secretary of Treasury was a terrific decision. I mean that is -- that's --

Charlie Rose: And to talk him into staying.

Warren Buffett: Yes, well, yes. But when I pick a good CEO, that's a terrific decision; and then I don't have to think about that.

Charlie Rose: Is it possible that you are just different? That somehow, someway because of your mother, because of your wife, influences on you have made you different, your own native intelligence, whatever it is.

Warren Buffett: Well, everybody is influenced by what's around

Charlie Rose: Ben Graham (ph) -- whatever it is that you, Warren Buffett, look at the world differently than most of the prominent businessmen in America.

Warren Buffett: Well, it may be true I think differently than a very good number of them. But I have lot of them that agree with me, one way or another -- they don't agree 100 percent with me.

Charlie Rose: Is it they -- yes, go ahead.

Warren Buffett: Yes, but nobody is in total sync with anybody else even if they're twins, probably. But there are -- I've heard from plenty of people who are very, very wealthy and I've heard from others who are business people who are not that wealthy. But that -- that in general agreeing with what I thought -- they've got -- they've got a similar hope for America. And there's plenty that disagree.

Charlie Rose: Two things that are on the horizon. Number one is Europe.

Warren Buffett: Yes.

Charlie Rose: You have I think said you're not going to be rescuing any banks over there, with any kind of significant investment. You've also said if this thing goes bad, you're in great fear of what the consequences are. What did you mean?

Warren Buffett: Well, it's big. And -- and you know, they have tried an experiment which -- where the imperfections in it are becoming manifest. And -- and the numbers are big. The banks are -- the solvency of the banks --

Charlie Rose: Right, right.

Warren Buffett: -- the banks are intertwined with the -- with the solvency of sovereigns and vice versa. And they have found that, well, they melded into a single currency for 17 countries, they didn't -- they didn't meld the culture. They didn't meld fiscal policies --

Charlie Rose: The politics, the politics.

Warren Buffett: -- all kinds of things.

Charlie Rose: Yes.

Warren Buffett: So they either have to come closer together in a major way or they have to separate. And -- and --

Charlie Rose: Yes and give up on the Euro and give up on the Euro Zone.

Warren Buffett: Yes and they don't want to do that and that's understandable. And there's all kinds of --

Charlie Rose: But there is also this argument: all they are doing is kicking the can down the road.

Warren Buffett: Well, they got to --

Charlie Rose: They really need a lot more on -- on the line and they really need to sort of do more at one time to make sure that they have stopped --

Warren Buffett: It's a short road, Charlie. You can see the end of that road. They better not give it a good kick or it won't be on the road any more.

Charlie Rose: If they thought it was a cliff --

Warren Buffett: Yes. No --

Charlie Rose: So what happens to us if it happens? If the worst happens what happens to the United States? What happens to the global economy?

Warren Buffett: I don't think -- I think-- I don't know what they are going to do. I mean when you get 17 of them, nobody knows what they are going to do. And politics et cetera, all kinds of things. But if you ask me the most likely thing that in the end they will -- they will decide to print money, which they've got a lot of problems doing because they do have this common currency. But when politicians face almost insufferable problems and it looks like they can solve it by printing money, I think they will do it. I think they will, they will -- to the extent they need to, they will -- they will help the banks but I don't know what -- I don't want to -- that's not a prediction. That's my best guess.

Charlie Rose: Yes but -- but the hour's late.

Warren Buffett: It's late. It's very late. And it's -- it's very late. They -- their banks were encouraged to load up with sovereign debt because there were no capital requirements against them. And it gave them the chance to leverage further and increase the earnings per share a little bit so they can load it up with them. And they thought that they were all good credits because they all belong to this union. And they're finding out that isn't true.

Charlie Rose: What did you see a year or so ago when you got out of European sovereign debt.

Warren Buffett: I saw where the can was going.

Charlie Rose: No but I mean, did you see it, and other people didn't see it?

Warren Buffett: Well, no, I think people --

Charlie Rose: Saw it but didn't --

Warren Buffett: It -- it was-- it's a little like our own situation back in 2006 and 2007. Everybody sort of saw it but you kind of thought well --

Charlie Rose: Well, I don't know that they all saw it but I don't think they understood it. I mean part of the problem was that the people didn't understand it. I mean the subprime crisis -- or you think I'm wrong about that. They saw it?

Warren Buffett: Well, I think people had kind of an uneasy feeling, a lot of people. But they thought, they were like Cinderella at the ball.

Charlie Rose: Right exactly that was the analogy they used, you remember? (INAUDIBLE) the executive says, you know, as long as the music is playing you have to keep dancing.

Warren Buffett: Right.

Charlie Rose: That was a classic --

Warren Buffett: That's right. And -- and he -- you know, he's probably going to (INAUDIBLE) mice at midnight but they didn't think it was midnight. And he thought he would get out ahead of time, it is -- that's - - he's not the only one.

Charlie Rose: There was a lot of that and in fact --

Warren Buffett: I made a lot of mistakes in that respect. I mean -- and I saw certain things taking place. But I didn't take strong enough action in many cases. I am as guilty as anybody. But in terms -- in terms of Europe, I think it was -- I think it was clear, well over a year ago that we were heading for a cliff. I mean they -- you just can't have people tied to a given currency who have lost the ability to print money behaving recklessly. And so it's going to -- it's going to come home to roost very quickly. And when those bond -- when bonds of those countries are -- are held in huge extent.

Charlie Rose: Yes.

Warren Buffett: And it's -- it's a bad situation. And it won't end the world, Charlie. Europe isn't going to go away. Europe will be stronger ten years from now for sure than it is now. I don't know how much agony it's going to go through in between. There will be a great market for goods, there will be great --

Charlie Rose: But is the answer austerity?

Warren Buffett: I don't know.

Charlie Rose: That's the question.

Warren Buffett: I mean it -- it's always great to say the other guys should get austerity. I mean that's the problem they have. It isn't a common austerity. It -- it's your austerity will take care of my bonds.

Charlie Rose: The Germans have a point, don't they?

Warren Buffett: Yes, sure they have a point, sure they have a point. Sure they have a point.

Charlie Rose: People are beginning to say maybe a flat tax is not such a bad idea.

Warren Buffett: A flat tax is, that is not progressive.

Charlie Rose: No.

Warren Buffett: No, no I mean -- you're going to have to raise some more revenue than we're raising now. I mean, we're going to have to bring it up to 18 percent of GDP or 15.5 percent.

Charlie Rose: Right, right.

Warren Buffett: And we're going to have to bring spending down.

Charlie Rose: Why don't you convince the President to lay out what he would do in terms of entitlements?

Warren Buffett: I -- Charlie, I have never called a president in my life.

Charlie Rose: You've never called him though.

Warren Buffett: No.

Charlie Rose: But he calls you and ask you to come and speak; he solicits your advice. And you come to that White House because he wants to hear what you have to say, I assume. He doesn't -- he doesn't bring you there to tell you what he thinks. He wants to know what you think.

Warren Buffett: He wants to give me a new tie, actually.

Charlie Rose: That is true.

Warren Buffett: He but it --

Charlie Rose: And it wouldn't have been better if he'd laid out for the -- for the political discourse in Washington, if he had laid out where he thoughts cuts would be appropriate.

Warren Buffett: Well, looking back, but this is easy to do. You do it in the stock market all the time.

Charlie Rose: Right.

Warren Buffett: But looking back, he probably should have prepared the American public somewhat better for what lay ahead. I mean we were not going to -- there was not going to some magic wand when he came in, in 2009. And he -- he did a lot of very correct things. I mean I -- I admire him enormously and the actions taken. But to the extent the people thought that was going to cure everything in six months or eight months or ten months, I mean that was -- that was a mistake.

Charlie Rose: As you know Standard & Poor's downgraded their evaluation of America mainly because of political dysfunction.

Warren Buffett: Right.

Charlie Rose: That at least is what they say. Do you know how we stop this political dysfunction?

Warren Buffett: That's the $64 question. I mean we've got people -- we've got too many people in Washington and -- and the American public understands this who are thinking primarily about, you know, how do we block the other guy from looking good. And -- and I want them both to look good. I want a government that looks good. And it's a -- it's always, there's always been a lot of that. But -- but I think it's -- it's just extraordinary. And -- and the -- and the -- the debt ceiling situation you know, just played it out in Technicolor and stereophonic sound for the American public. And the American public feels that -- that Washington just is -- in some ways dysfunctional because they want it to be dysfunctional. And that's -- that's --

Charlie Rose: Will they think they win by dysfunctionality?

Warren Buffett: Well, if -- if -- if you can be in either party and convince the American public who are not feeling good about how their country is going, if you can convince them it's the other guy's fault, I mean, that's -- that's the way to win.

Charlie Rose: Yes. Did you would think the American public would rebel against that if they could find out who they thought shows the least regard for their own sense of well-being?

Warren Buffett: I would really hope so and I think there's a possibility of that. But how this all plays out, I mean, I think that there's -- I think there are plenty of people in both parties, this is not limited to one party, who -- who are thinking that things are going to look bad over the next 12 months, at least be perceived as bad and the unemployment rate won't fall that much and so on. And I think they think how do we lay this on the other guy's doorstep. And that's --

Charlie Rose: And so therefore I will not vote for something that might improve the economy of the country because I don't want to see the other guy do well.

Warren Buffett: Well, I -- it may not be quite that dramatic but it's -- it's -- it's that impression. And -- and I think that's why people have the feeling about Washington that they do.

Charlie Rose: But the problem is that they may very well be saying a plague on both your houses. They're certainly saying that about Congress.

Warren Buffett: Yes, I think they feel that way about Congress.

Charlie Rose: Yes.

Warren Buffett: And I think they probably got a pretty good reason to feel that way about Congress.

Charlie Rose: Do you think we need a third party?

Warren Buffett: Oh I just don't know how that works, you know.

Charlie Rose: It's great to see you.

Warren Buffett: It's great to be here.

Charlie Rose: A pleasure to have you here.

Warren Buffett: Thanks Charlie and another 20 years to you.