CNBC/Dave Grogan Warren Buffett appearing live on CNBC's Squawk Box, March 2, 2011

Warren Buffett tells CNBC that when it comes to possible acquisitions, there aren't many "elephants" out there and not all of them want to be in the Berkshire Hathaway "zoo."

That's a reference to his letter to shareholders over the weekend, in which he said his "elephant gun" has been reloaded and he has an "itchy trigger finger" for a major acquisition.

Appearing live from Omaha on CNBC's Squawk Box this morning, Buffett tells Becky Quick he doesn't have any "high probability" deals in the works now.  While he's not necessarily scared away by higher stock prices, they do make it harder to find a deal now than two years ago.

TRANSCRIPT PART 1: MOST BERKSHIRE BUSINESSES 'INCHING ALONG'

Buffett says that of the 50 or so large companies that qualify as "elephants," he would not want to pay a 20 percent premium for most of them.  He also points out it's easier to buy private companies.

He doesn't rule out an international acquisition, but says a purchase in the United States is more likely.

Buffett does reveal to Becky that Berkshire had an "iron in the fire" within the last few days, but lost out to another buyer.  Was it an "elephant" on the scale of Burlington Northern Santa Fe?  No, says Buffett, more like a "zebra."

AMERICAN ECONOMIC DOMINANCE DIMINISHING

In a discussion about the U.S. dollar, Buffett said that over time it will become "less important" as America's "dominance" of the world's economic system "diminishes."

"That doesn't mean we aren't going to be the leading player 25 years from now, we will be.  But this overwhelming dominance that we, post World War Two, that we exhibited around the world, other countries have caught on to some degree... We should be glad they've caught on.  Their people are going to live better because they've caught on.  The people in China are not smarter than they were 50 years ago, they are not working harder, they've learned how to unleash their potential.  It's a marvelous thing.  But the United States is the example for the world."

While he concedes the U.S. economy will not be able to grow as quickly as China's, he notes that country is starting at a "far, far lower base."

UNEVEN U.S. ECONOMIC RECOVERY

Buffett says he thinks the U.S. economy is "coming back" and in the long-run "you can't stop" the United States, but most of Berkshire Hathaway's businesses are closer to "inching along" than "chugging along."

Still, some units are doing well.  He says Berkshire's railroad business is about 60 percent back from the bottom and Iscar, the company's Israeli tool maker, had a record month in January.

Buffett also says Berkshire will be increasing its capital spending this year by a billion dollars, with most of that spending coming in the U.S.

He says the just-announced purchase by NetJets of 50 jets from Bombardier for $2.8 billion anticipates an increase in demand for business travel.

Buffett does see improvement in the nation's employment picture as the economy improves.  He guesses that the unemployment rate will be in the "low 7s" by the 2012 elections and that excess housing supply will have been soaked up in about a year.

Pointing out that there's been a "massive" government stimulus of the economy since the economic crisis began, Buffett says he thinks that the nation doesn't need as much fiscal or monetary stimulus as it is getting now.

Asked if he's calling for an end to the Federal Reserve's QE2 program of asset buys, Buffett says that while he has "enormous" respect for Fed Chairman Ben Bernanke, he doesn't think the nation needs more stimulus right now.

As he has in the past, Buffett warned that the U.S. is "following policies that will lead to lots of inflation down the road unless changes are made."  He calls inflation the "ultimate tax" and thinks budget deficits around 10 percent of GDP are too high to sustain.

While Buffett believes benefits for public sector workers should be cut back for the future, he also says that existing promises on things like pensions and health care should be kept.

While he is not worried about high oil prices because they don't have a big impact on his investments, Buffett says he does have some concern about cotton's price level.

CONFIDENCE IN WELLS FARGO FINANCIALS

Buffett says the recent surprise announcement that Wells Fargo CFO Howard Atkins is retiring for "personal reasons" was not handled very well and "obviously there is something there beyond what was in the news release."

But he thinks Atkins' departure has "nothing to do" with the bank's financials.   After spending four hours over the weekend looking at the Wells annual report, "I feel very good about the whole Wells operation."

As of the end of December, Berkshire owned over 342 million shares of Wells Fargo, currently worth more than $10.8 billion. 

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