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Buffett Says Recession Could Be Bad

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Warren Buffett knows a thing or two about money, so when he says we’re entering a bad recession, there’s reason to pay attention. Buffett said:

[M]y general feeling is that the recession will be longer and deeper than most people think. This will not be short and shallow. I think consumers are feeling gas and food prices and not feeling they’ve got a lot of money for other things.

This mirrors my concern. We seem to be more in a housing-market fueled slump rather than a true recession. BUT, rising commodity prices are combining with this slump to create the perception that things are getting dire. If enough Americans come to believe we’re in bad shape, we could enter a self-fulfilling deep recession. People will cut their spending, small business will either choose not to open or not to expand and larger corporations will lose revenue.

People do not base economic decisions on real economic conditions so much as they base them on perceptions of economic conditions. Buffett, I think, is reading the consumer mood accurately. Unfortunately, his grim prediction will just fuel the negativity.