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The credit freeze is “sucking blood” from the U.S. economy, Buffett said.

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Billionaire owner of Berkshire Hathaway Warren Buffett in an interview with Bloomberg News today:

Billionaire Warren Buffett, the world’s preeminent stock picker, said the U.S. economy is “flat on the floor” after a cardiac arrest as companies struggle to secure funding and unemployment increases.

“In my adult lifetime I don’t think I’ve ever seen people as fearful, economically, as they are now,” Buffett said today in an interview with Charlie Rose to be broadcast tonight on PBS. “The economy is going to be getting worse for a while.”

Previously, Buffett has been quoted as saying the credit crisis as an “Economic Pearl Harbor.”

As the most famous and most successful investor in remembered history, no one can doubt his knowledge of the market place and business economics.

In another Bloomberg headline:
Cash-Starved Companies Scrap Dividends, Tap Credit

Carmike Cinemas Inc., the third- largest U.S. theater chain by screens, suspended its dividend, while Duke Energy Corp., owner of utilities in five U.S. states, tapped $1 billion from a credit agreement and RC2 Corp., the maker of infant and preschool products, canceled an acquisition.

The paralysis in credit markets is changing how U.S. companies do business as banks pull back on loans or make them prohibitively expensive. Some companies are closing plants and stores, postponing takeovers and grabbing any available credit in a fight for survival.

“If businesses don’t have access to capital, smaller companies in particular, they might get wiped out,” said Alec Young, a New York-based equity strategist at Standard & Poor’s. “It’s impossible to quantify how expensive this crisis is going to be for Corporate America; there’s unlimited downside.”

In another Bloomberg report:
U.S. Economy: Manufacturing Contracts Most Since 2001 (Update1)

Oct. 1 (Bloomberg) — Manufacturing in the U.S. contracted in September at the fastest pace since the last recession as the credit crisis spread beyond Wall Street.

The Institute for Supply Management’s factory index dropped to 43.5, the lowest level since October 2001 and below economists’ forecasts, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction.

Today’s figures show that manufacturing, which had weathered a domestic slowdown because of record exports, is now starting to buckle as expansions from Japan to Germany falter with the global financial crisis. The housing slump has already spread to autos, and other industries may follow as mounting foreclosures, tougher lending rules and rising unemployment choke off spending.

“This sharp drop is putting maybe an exclamation point behind the word `recession,”’ said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, referring to the ISM report.
[…]
“Manufacturing could be on the brink of a collapse,” said Lindsey Piegza, a market analyst at FTN Financial in New York. “There are no orders, no jobs and there is really no incentive for businesses to invest. The credit crisis is compounding the problem.”

From an AP story:
Stock losses take a heavy toll on retirement savings

The financial crisis that toppled major Wall Street banks and snarled credit markets around the world has also taken a toll on nest eggs, forcing people to rethink when — and even if — their savings will allow them to retire.
[…]
For 65-year-old John Howe, everything has been called into question.

“Oh, my God, I’m going to have to work until they put me in the hole!'” said Howe, 65, of Kingsville, Texas, joking about the market’s historic drop earlier this week.

The stories go on and on. But if these facts don’t cause you to support the Economic Stabilization Bill, then I guess you don’t care about keeping or getting a job, your mortgage or your house value, your credit card interest rates skyrocketing or the balance being called due, your retirement and children’s college funds disappearing, or being able access credit to pay for those unexpected bills or even Christmas presents. I guess all those things don’t matter.

But if you do care about your financial health and your job, then support the economic stabilization bill. The taxpayers are not going to be on the hook.

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Written by Valerie Curl

October 2, 2008 at 3:20 AM

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