In his New York Times op-ed piece Mr. Buffet alludes to the butterfly effect without adequately describing the complexities inherent in a chaotically dynamic complex economic system. By simply suggesting that the butterfly effect governs monetary policy ceteris paribus in some mystically negative way when the federal government opts to inject 'greenbacks' directly into the economy (long-term) understates the complexity of our dysfunctional ultra-capitalist system.
The butterfly effect for those who may have just read the back cover of any number of books on complex (originally termed chaotic, sometimes termed dynamic) systems describes the effect of any seemingly dissociated, insignificant variable to distort or perturb a complex system. Without getting too far off topic suffice to say that a butterfly flapping its wings on the other side of the world could (the operative word here is could) disrupt global weather patterns at an indeterminate time such that a hurricane might result; purely theoretical: granted it is a stretch, but somewhat accurate.
Delving into complex systems theory is not for the intellectual normal 'curvers'. It is an extremely intense area of research that incorporates a myriad of advanced mathematical models that describe (for predictive purposes) a coherent pattern inherent to most seemingly chaotic systems. Let's leave this area of Mr. Buffet's dissociated reference to this discipline isolated - where it belongs. For more in-depth, intense, and relevant information on complex systems please reference material published by the experts at the Santa Fe Institute http://www.santafe.edu/.
Back to the more mundane task of analyzing Mr. Buffet's factually thin assumptions.
Mr. Buffet stated in his essay that the actions of "the Bush and Obama administrations" to 'rescue' our financial system (a few large banks) "with a gusher of federal money" saved us from economic collapse. But when our government uses fiscal policy to stimulate (pad) the wallets of financial industry friends (Wall Street bankers) instead of allowing the FDIC to do its job, it's effectively squandering federal funds.
Federal fiscal stimulus to the tune of $2 - $3 trillion dollars would have been a better application of federal money; in effect an investment in the future prosperity of our economy. The key word here is investing, not passing on to wealthy banker's money so they can pay hefty bonuses to their executives. And why are the large banks still carrying those 'toxic' assets on their books? Why haven't they used a good portion of this flood of federal money to expunge these illusory assets from their balance sheets? Could it be because it's more fun to have parties and get paid unbelievable sums of "greenbacks" in compensation for screwing up than to do something meaningful with the taxpayer's money?
Here's where the complexity of an economic system comes into play. A distinction that Mr. Buffet never made in his essay is that there are two types of fiscal spending. The raiding of the U.S. Treasury by large Wall Street banks so that they may ultimately continue to pay exorbitant bonuses to incompetent executives is horribly wasteful. But investing in our country's infrastructure by building a 21st century bullet train transportation system, transforming a morbid industrial sector into a global leader in the production of green technologies, and building a massive green energy collection grid would create good paying jobs, decrease commute times (raise productivity), and build a future income base that would fuel increasing incomes (curve shifting outward). So by investing in our country we stimulate the economy by building a firm foundation that would allow it to grow exponentially in the future. This exponential growth would spur increased tax collection on income not available if fiscal funds continue to be squandered away at the top of the income pyramid. Therefore the siphoning off of income to feed the voracious greed of those at the top of the income pyramid is the current shortsighted approach of our federal government.
Trickle down economic theory (allowing a gusher of federal money to flow to bankers and business elites) is a failed faith based approach that only exacerbates an already thirty plus year disparity (extreme mal-distribution) between the princely incomes at the top of the income pyramid and the declining real incomes of the majority of citizens at the bottom.
In the real world complex systems model of our economy the stabilization of what we'll call sub-systems is an essential ingredient in insuring a sustainable economic foundation. Power, influence, and control must be exerted across economic 'sub-systems' in a balanced fashion. No single 'sub-system' can be allowed to exert an inordinate amount of power, influence, and/or control on any of the other sub-systems because this disrupts the stability of the entire system - the whole system is perturbed. Therefore labor and capital (businesses) must exert equal power across their sub-system domains so that the stability and sustainability of the entire system is assured over the long haul.
Also, per my many essays on this dysfunctional ultra-capitalist system - the financial crisis is a symptom of loans going bad in an economy were real incomes of ordinary Americans are still plummeting. No Mr. Buffet the "United States economy is [not] now out of the emergency room" corporate revenues continue to fall (a direct result of unabated real income loss), and unemployment continues to rise - a good percentage of the unemployed are dropping off the official government count.
Our greatest threat is not inflation but deflation.
Will we "evolve into [a] banana-republic" through what you term "unchecked greenback emissions"? The answer to this question rests with all the political & business elites (like yourself) who have a vested interest in maintaining this dysfunctional top-heavy ultra-capitalist contrivance. If we continue to pump unlimited federal funds up to the top of the income pyramid while neglecting necessary investments in our country that will build a platform for future growth we will undoubtedly become the banana republic you spoke of in your essay.
Keep in mind that we must still enact laws that provide workers with more power over what is now a lopsided all powerful business oriented economy. We must also fix our government at all levels, local, state, and federal by making it illegal to lobby an elected representative. Additionally, we need to enact term limits for every elected governmental representative.
Mr. Buffet, will you and others in the political & business elite have the wisdom to advance the common interest so that we may all enjoy the benefits from a more equitable, sustainable, and stable economy? I guess only time will tell whether we're unable to change course.