The United States should look at emerging markets for clues on how to sustain economic growth, according to U.S. Federal Reserve Chairman Ben S. Bernanke. While the advanced economies of the world have stagnated since 2008, countries like China, Brazil and parts of Southeast Asia have enjoyed growth rates in the 7% to 9% range. Although several have slowed this year, they're still faring better than the economies of the United States and Europe. "Advanced economies like theUnited States would do well to re-learn some of the lessons from the experiences of the emerging market economies,"Bernanke said in a speech delivered yesterday (Thursday) at a Cleveland, OH forum. Specifically, Bernanke attributed growth in emerging markets to "disciplined fiscal policies, the benefits of open trade, [and] the need to encourage private capital formation while undertaking necessary public investments." The so-called advanced economies certainly could benefit from more fiscal discipline. Decades of profligate government spending have created debt problems that are crippling those economies. In the United States, which has the world's largest debt at $14.7 trillion, the issue triggered a political crisis over the debt ceiling this past summer that roiled stock markets. Although the United States is unlikely to default, the growing debt - 98% of the nation's gross domestic product (GDP) -- hangs over the economy, hindering growth. In Europe, the situation is far worse. Greece has been teetering on the edge of default for more than a year. It's been sustained only by the flow of bailout money from stronger European Union countries like Germany. Greece isn't alone, either. Countries like Italy, Ireland, Portugal and Spain also have dangerously high sovereign debts. The crisis has hobbled the economy of the entire European Union (EU), with no end in sight. One of the main reasons many emerging economies have thrived is that they have avoided the rampant deficit spending that created the crippling debt in the advanced countries. And because they haven't been struggling, most emerging market economies have much greater flexibility in their monetary policy - they have leeway to lower interest rates - to cope with the current global slowdown. Bernanke noted that emerging markets account for more than half of total economic activity today, up from less than one-third in 1980. Low Debt, High Growth The most dramatic example of growth in an emerging market is China. That nation's GDP is forecast to be 8.9% this year and 7.8% next year. How's this for fiscal discipline: China's debt as a percentage of GDP is a mere 7%. Not only that, but it holds more than $3 trillion in foreign reserves. When the financial crisis of 2008 struck, China was able to invest billions in infrastructure to stimulate its economy. Meanwhile, the government has made a major effort to transition the Chinese economy away from its reliance on exports and towards stronger domestic consumption. Another example is Brazil. In his speech Bernanke pointed out that better fiscal management helped Brazil get its hyperinflation of the 1986-94 period under control.

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Believe it or not, there was a time when investors saw the euro as the savior currency of the world. People talked about how the euro would replace the dollar as the world's reserve currency - and there was plenty of proof to support that opinion. At the time, t he European Central Bank (ECB) had the right monetary solutions in place to fight inflation, while the U.S. Federal Reserve was struggling to keep inflation under control . That was another point for the euro, and a strike for the dollar. So not surprisingly, central banks started replacing some of their U.S. dollar reserves with euros, and the euro became a second "reserve currency" for central banks. The euro also soared past the dollar in just a few years. In fact, the euro shot up from 82 cents at its inception to $1.60 in less than 10 years. Yes, it seemed that the planets were aligned for the euro to step up to the plate and become the world's reserve currency. But that's because the euro had never experienced a real "rough patch," or serious monetary crisis. Fast forward to 2008. The Euro Gets its First Test Once the credit crisis was in full bloom in mid-2008, loans dried up and unemployment went to 10% in the United States and Eurozone. When crisis struck in 2008, the euro came under pressure. Germany and France could handle the issues, but the world quickly learned that Greece, Portugal, Spain, Ireland, and Italy were the Eurozone's downfall. The euro can only be as strong as these weakest links. Unfortunately, none of these weak links have recovered yet. More importantly, they are not going to recover anytime soon. A bond crisis like the ones erupting in Greece, and to a lesser extent Portugal and Ireland, can take years to shake out. That's why, to this day, no matter how many loans the ECB or the International Monetary Fund (IMF) gives Greece, Portugal or the other nations in debt, they still haven't been able to fix this problem. The European Union (EU) continues to give Greece bailout funds. But securing bailout money will not solve things. It's just a band-aid, not a cure. The larger problem is that the ECB sets an interest rate policy that does not work for all EU nations. Larger, more fiscally sound nations like Germany and France can handle it when the ECB hikes rates. The smaller debt-ridden nations can't. These guys are quickly finding this out now. Here's How It All Ends Up In the next five years, I highly doubt the Eurozone will keep all its members. It will still exist, though. The euro will survive. But for that to happen, it will have to purge the dead weight that's dragging it down. In 2016, I'd say only the larger countries will still be in the euro. I have no doubt that Germany and France make the cut. They will probably find some way for Italy and Spain to stay in the euro, too. These are the largest economies (by GDP) in the Eurozone.

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Investing legend Warren Buffett announced Monday that Berkshire Hathaway might execute a share buyback for the first time ever - a bullish signal that it's time to buy stocks at record bargain prices. Buffett said Berkshire is authorized to repurchase stock for the first time as long as its price is less than 1.1 times book value, and it retains cash holdings of no less than $20 billion. Berkshire's Class A shares rose 8% Monday on the news, and Class B shares climbed 8.6%. Buffett didn't just start a rally in his own company's stock, either. The whole market moved on news of Buffett's bullish sentiment. The Dow Jones Industrial Average on Monday rallied 272 points, or 2.5%, and followed with another 148-point, or 1.34%, gain yesterday (Tuesday). That's after last week's drastic 738-point, or 6.4%, tumble in the Dow. The Standard & Poor's 500 Index is up 3.4% this week after last week's 6.5% fall. "When Buffett does anything, it's not so much the economic impact but the psychological impact of what he does, and this was hugely important from a psychological perspective," Larry Glazer, managing partner at Mayflower Advisors LLC, told The Wall Street Journal. Now investors are looking for their own Buffett-style bargains, believing that the famed investor's moves mean it's time to buy. Why Berkshire Would Make a Rare Share Buyback Move Buffett has long been against share buybacks. "The continuing shareholder is penalized by repurchases above intrinsic value," he wrote in Berkshire's 1999 annual report. "Buying dollar bills for $1.10 is not good business for those who stick around." He said buybacks were usually only motivated by an "ignoble reason: to pump or support the stock price." So what would change his mind now? Buffett's move signals his belief that big-name stocks are going for bargain prices - and they are "Buys" because the U.S. economy will avoid another recession. "If he thought the possibilities of a recession were on the horizon, then he'd wait to do this," James Dunigan, chief investment officer for PNC Wealth Management, told Bloomberg of Buffett. "You can make a number of arguments that on some traditional measures, the market is undervalued." Indeed, this is a sign Buffett thinks his Berkshire shares are extremely cheap. Analysts estimate Berkshire stock's intrinsic value is $130,000 to $150,000 per share, 20% to 39% higher than Tuesday's closing price of $108,020.00. Since Berkshire's share price tends to rise and fall with the overall market, faith in his own stock has spread to other companies. "He has a lot of investments in the largest companies in the market, so putting his money in Berkshire is another way of being bullish on the market," Eric Green, a fund manager at Penn Capital Management, told Bloomberg. "If the stock market is going down, then his stock will go down, and he's certainly smart enough to know that and he thinks the market is undervalued." Berkshire is estimated to have $77 billion in cash and cash equivalents, and per stipulations in the buyback plan it has to keep holdings at $20 billion - leaving $57 billion to spend on its own stock.

Berkshire is one of many U.S. companies to buy back shares with their record-high cash piles. U.S. corporations in the second quarter bought back $475.2 billion more of their own shares than they issued, according to the U.S. Federal Reserve. In August, 198 companies authorized new share buyback plans, the most since February 2008. This year is set to be the third most active buyback year on record - and a sign that U.S. companies aren't concerned about another recession. "If Buffett thought there was even a meaningful chance of that happening, he would not buy back any stock; he would hang on to the cash and wait to put it to work," Whitney Tilson, from hedge fund T2 Partners, told The Financial Times. "In 2008 he put $50 billion to work; he would love to have that opportunity again." Buffett attempted a share buyback during the dot-com era when Berkshire's share price fell below $45,000, but told CNBC's "Squawk Box" program that the reaction to his announcement was "self-defeating" because the stock went up before he bought any. Berkshire's plan stipulates the company pay no more than 10% premium to current book value. Berkshire set its book value at the end of June at $98,716 per Class A share and $68.71 per B share. Berkshire A and B shares closed 9.4% and 4.7% higher than their respective book values.