Warren Buffett’s Warning On Currency Devaluation Resurfaces As Dollar Weakens

An old video of Warren Buffett cautioning against governments’ tendency to debase currencies has resurfaced amid renewed concerns over the US dollar’s recent weakness. The dollar index hit a two-month low past week. However, since then, the currency has recovered some of its losses.

In the resurfaced video, Buffett highlighted a fundamental risk posed to the currency by the tendency of governments to weaken their own currencies over time.

“We wouldn't want to be owning anything in a currency that we thought was really going to hell.” Buffett said in the clip, adding that fiscal policies often create incentives for currency debasement. Tthere will be a push toward  weaker currencies…the natural course of government is to make the currency worthless over time and it's got important consequences and it's very hard to build  checks and balances into the  system to keep that from happening, he noted, emphasising that this phenomenon is not unique to the United States but occurs globally.

Buffett explained that when authorities control the issuance of money, history shows they often resort to measures that erode its value, whether through printing excess paper currency or other forms of devaluation.

The resurfaced comments come at a time when the dollar index has been under pressure, driven by expectations of prolonged fiscal deficits and potential rate adjustments.

Meanwhile, The rupee appreciated 54 paise to close at 89.66 against the US dollar on Friday, supported by corporate dollar inflows and easing crude oil prices. Forex traders said a positive trend in domestic equities and Brent crude oil prices hovering near $59 per barrel supported the domestic unit at lower levels.