Warren Buffett: US Economy has ‘fallen off a cliff’

Billionaire investor Warren Buffett this week said the US economy had ‘fallen off a cliff’ and warned that a rebound could trigger inflation more drastic than that experienced in the late 1970s.

The 78-year old owner of insurance and investment firm Berkshire Hathaway spoke live on US cable network CNBC.

“Not only has the economy slowed down a lot, but people have really changed their habits like I haven’t seen,” he said. “I’ve never seen the consumer or the Americans just generally more fearful than this. And they’re also confused.”

Unemployment has further to rise before the recession is finished, Buffett warned, although his long term view is optimistic.

“Everything will be all right. We do have the greatest economic machine that man has ever created.”

The government will have a big role to play in turning the economy around, Buffett said.

“What is required is a commander in chief that’s looked at like a commander in chief in a time of war.

“We’re in a big war, and we’re going to use money to fight it.”

Change won’t happen overnight, he concluded.

“You can’t turn around on a dime.”

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