BECKY: Warren, let's go back just to Fed policy and some of the things that are happening. Joe mentioned earlier about the idea that the government, not just this government's printing money.

BUFFETT: Absolutely.

BECKY: Is it about to overtake us? You start to worry about inflation?

BUFFETT: Yeah. It--you know, in--I think, you know, we've got major problems. And we're--and I said, we're always going to have problems, so this does not mean I'm bearish on America or anything. But we have a situation in Congress where we have a 10 percent deficit in terms of GDP, and we may be drifting into even larger numbers. I mean, we've made promises that--for the future that are really kind of inconsistent with the revenue streams we'll have. There are three ways of solving that: breaking the promises of modifying them, taxing a whole lot more, or inflating your way out of it. And inflation is the--is the ultimate tax. I mean, it taxes people who don't know they're being taxed. It taxes people who believed in paper money, who believed in their government. It's a particularly--you know, I find it--it's almost a--it's not the way government should be behave, but they do behave that way. Ad it's the easiest thing to do. I mean, we...

BECKY: Do you think we're intentionally doing that right now? Do you...

BUFFETT: Oh, I don't think it's so much intentional, but it's the fact we don't want to do the other things, and so it becomes the default option. And we are doing things--we are following policies that will lead to lots of inflation down the road unless changes are made. And once--inflation is the kind of thing, when it gets started, you don't even--you don't particularly notice it. It's a little like a guy, you know, jumping off a 50-floor--out of a 50-story building. The first 45 stories, he really doesn't notice a lot of change, you know, in his circumstances.

BECKY: Mm-hmm.

BUFFETT: But eventually you hit the ground. And there is no way you can run the kind of deficits we're running and following other policies, and this is true around the world, without it being enormously inflationary. And no politician is going to come out and say we're really going to solve this by making our money worth less. But--I mean, it'd be suicide to do it. But that is--that's the practical effect of the policies that are being followed now. You know, they're not written in stone, they can--they can be changed. But the
easier course for governments to follow always is to inflate, and that's why paper money--and I don't disagree with your viewer that wrote in. I mean, paper money generally has a lousy future.

BECKY: Mm-hmm.

BUFFETT: I mean, you wanted to use cash then. People said cash is king. The ability to use cash then was king, but having the actual cash was the dumbest thing you could do. And--but people run to cash and they run, you know--but paper money is not a good bet. And the more of it that you issue--I mean, there have to be consequences to issuing paper money. There are consequences to the-to the Fed buying lots and lots and lots of securities and giving credits to the banking system in return. If it was all that easy, you know,
we'd be doing it all the time.

BECKY: But you sound a little different than you have on this point the last few times we've checked in with you. It sounds like this is a time, maybe an inflection point where you're getting a little uncomfortable with this.

BUFFETT: Yeah, I wrote an op-ed piece in The New York Times and--over a year ago--and I said this is--this is OK now, but it's-- but it is morphine, and you've got to get off of it. And we haven't shown much tendency to get off of it so far. I mean, this--you know, the Simpson-Bowles thing came in, and those are two terrific people, they worked hard at it. They got 11 out of 18 votes, you know, and nothing's been heard since. And that's wrong, in my opinion.

BECKY: That disappoint you?

BUFFETT: Yeah.

BECKY: What would you like to see happen? Would you like to see the panel's recommendations be adopted?

BUFFETT: I would like to see something seriously adopted that leaves us in a situation down the road that is tenable in terms of having a money that will retain its value to a very high extent. The fact that inflation now is 1 or 2 percent, you know, doesn't mean anything. I mean, that--you know, I--if you jump off the 50th floor, I mean, at the 45th floor, you know, you should not judge the success of your effort by where you are at that point.

BECKY: But addressing this growing problem, you don't think is something that can wait till after the 2012 elections?

BUFFETT: No, well, then there'll be a 2014 election. I mean, no, I think--I think if you've got a very important problem, whether it's in business, whether it's in your personal life, wherever it may be, you know, you address it promptly.

David Fuller's view A number of us have been talking about this problem for a long time, but there were always academic economists or even central bankers happy to state that there was no inflation, or at least no core inflation in sight.

Well… when Warren Buffet talks about the government's growing deficit problem and the temptation to address it by printing money, and the inflationary consequences that we face, the financial world will pay attention.

Note: it takes a long time to plough one's way through this unedited transcript, and without seeing the live broadcast some of the lighter moments do not come across. Nevertheless, it contains some gems. It is also encouraging to hear one's market views validated by the Oracle of Omaha.