Monday, November 9, 2009

Warren Buffett, the Railroads, and the Renminbi

Is there a link between Warren Buffet’s recent big investment in railroads, the U.S. current account deficit and Chinese surplus? Yes according to Simon Johnson in The Baseline scenario (November 7) here . The Omaha billionaire and owner of the Berkshire Hathaway holding would be betting on a renminbi appreciation that would boost Chinese commodity imports, which are, by the way, transported by U.S. railways and are a major U.S. export to China. Hence the reference to the G-20 meeting in the title of the post, since exchanges rates and current account imbalances are central to the G-20 discussions.

The Buffett move could also be interpreted as a bet on the rise of oil prices, because in that case transport by trains becomes much cheaper than transport by trucks, notes a reader of The Baseline Scenario.

Moreover both effects could happen simultaneously ...

No comments: