Wojtek Dabrowski reports that Warren Buffett is reasonably sanguine:
"I wouldn’t quite call it a credit crunch. Funds are available," Buffett said during a question and answer session at a business event. "Money is available, and it’s really quite cheap because of the lowering of rates that has taken place."
He added: "What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago."
This is true, although it’s not the whole truth. The problem is that there was so much ‘dumb money’ around a year ago that it was propelling not only Wall Street profits but also a large chunk of the entire US economy. Every disaster we’ve seen over the course of the present crisis was the result of too much dumb money flowing into mispriced debt. And all that money helped drive economic growth, largely but not only in the housing and finance industries. When the dumb-money trades get unwound, so does the economic growth which came with them. And what that means (p=65%, according to InTrade) is a recession in 2008.
Buffett’s happy to say that the US economy will "do very well over time". But note that he’s not making any promises about how it’s going to do over 2008.