Warren Buffett's Warning on CNBC: Fed Easing Creates 'Dangers' for Confidence in Dollar

Warren Buffett has written a 'Thank You' note to 'Uncle Sam' for preventing a catastrophic economic meltdown in September of 2008, but he's not as enthusiastic about what the Federal Reserve is doing right now to boost the economy.

In a live telephone interview on CNBC's Squawk Box this morning following up on his New York Times op-ed, Buffett essentially warned that the Fed's $600 billion quantitative easing program probably won't help the economy very much, but could undermine confidence in the U.S. dollar.

In any case, he says, the government is already doing a lot to stimulate the economy simply by spending more than it takes in as revenue.

Here's the exchange from this morning:

JOE KERNEN: What about — you love Bernanke. (Buffett laughs.) No, you've commended him in the past. You thought he was doing a great job. I'm wondering whether you — that some of the bloom is off the rose? I'm not trying to put words in your mouth. What about QE2? Where do you come down on whether that's necessary at this point?

WARREN BUFFETT: I do think Ben Bernanke — I think he was a huge hero of September, 2008. I don't get very enthused when central bankers start targeting higher inflation. And I don't think the impact will be huge from it, and I think it opens up certain dangers in terms of people worrying about the United States government printing money.

We, incidentally, we have a huge fiscal stimulus going on now, Joe. Fiscal stimulus comes about when the government spends considerably more than it's taking in. We are spending 8 or 9 percent of GDP more than we're taking in, and that's a stimulus that hasn't occurred since World War II.

It doesn't have to be labeled a stimulus bill. When the government sends out a check and he doesn't raise the full amount of that check, that is stimulus, whether it's in a stimulus bill or whether it's in a hundred other bills. So we've got a lot of stimulus going on.

People like to think that government can solve everything overnight. It can't do it with fiscal and monetary policy.

BECKY QUICK: Were the critics right overseas? Ahead of the G20 we heard from China, from Germany, from Brazil, all of them criticizing what the Fed was doing. And then this week we heard from a number of Republican lawmakers and from economics professors who are very concerned about it too.

BUFFETT: Yeah. We'll see how it plays out. I would not want to bet my chips on the fact that the government monetizing 600 billion of debt is going to make a big change.

BECKY: But is it dangerous?

BUFFETT: I think — I think at some point it starts — I think it has a psychological effect on how people think about the future of money if they think the government will monetize debt. And, I — once unleashed that can be a little bit difficult to put back in the bottle.

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