Some dire predictions from billionaire Warren Buffett.

In his letter to shareholders, in Berkshire Hathaway's 2008 annual report Buffett says the economy will remain a shambles this year "and, for that matter, probably well beyond", although he does see better times down the track. America's best days, he says, still lie ahead.

Buffett, who has provided advice for Obama also seems to be concerned about the long-term impact of the US Government's handouts which would, among things, boost inflation.

"In poker terms, the Treasury and the Fed have gone 'all in.' Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone's guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won't leave willingly."

That said, he says Government intervention was absolutely necessary. Without it, the economy would have imploded. "Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat."

As always, he warns that the banking sector's dependence and usage of derivatives is dangerous. "Receivables and payables by the billions become concentrated in the hands of a few large dealers who are apt to be highly-leveraged in other ways as well. Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It's not just whom you sleep with, but also whom they are sleeping with. Sleeping around, to continue our metaphor, can actually be useful for large derivatives dealers because it assures them government aid if trouble hits. In other words, only companies having problems that can infect the entire neighborhood - I won't mention names - are certain to become a concern of the state (an outcome, I'm sad to say, that is proper)."