Munger On Inflation: ‘The Biggest Long-Range Danger Apart From Nuclear War’
In this era of PR and pandering, confusion and Covid, it’s always refreshing to hear from Charlie Munger, vice chairman of Berkshire Hathaway, to get his sense of which way is up.
He’s 98 now, but hardly lacking for brainpower or bluntness. At the annual meeting of The Daily Journal, the media-tech company he chairs, he had plenty to say about the current moment, from crypto to memestocks (“a speculative mess and a speculative orgy”), index funds (“I think the world of Larry Fink, but I’m not sure I want him to be my emperor”) to virtual meetings (“It’s an amazing thing what you can do on a telephone”) during the livestreamed session with investors, and also in a follow-up interview with Yahoo Finance. (Hats off to Andy Serwer for the great get.)
He saved his most dire warnings to talk about inflation, which, he reminded, has been responsible for the undoing of entire democracies when left untreated. “You can argue it’s the way democracies die,” he said (though he doesn’t think that’s an immediate concern now, of course).
The videos are worth a weekend watch, but I pulled some of my favorite quotes out, worth chewing over.
Inflation is a very serious subject. You can argue it’s the way democracies die. When democracy dies in Latin America, inflation is a big part of it. So it’s a huge danger once you’ve got a populace that learns it can vote itself money. If you overdo it too much, you ruin your civilization a lot. And so, of course, it’s a big long range danger.
If you look at the Roman republic, even after they went to an empire with an absolute ruler, they inflated the currency steadily for hundreds of years. Eventually the whole damn Roman Empire collapsed. So it’s the biggest long range danger we have probably, apart from nuclear war.
Why should a civilized government want an ideal, untraceable technology to come into the payment system run by a bunch of people who want to get rich quick for doing very little for civilization? Of course, I hate it. I don’t think it’s good that our country is going crazy over Bitcoin and its ilk. I think the Communist Chinese were wiser than we were. They just banned it. When you let a bad genie out of a bottle, God knows what happens. I think it was a huge mistake to allow it at all.
If I were the benign dictator of the world, I would make it unfeasible to make short term gains in securities, because we now mix up a legitimate activity, capital raising for enterprises that need money to do their capitalistic function, with a gambling casino, where people come in and gamble. And those two functions, when they’re mixed, as they are in a stock market or Bitcoin, create a speculative mess and a speculative orgy. And it’s dangerous for the republic.
We’ve had this enormous transfer of voting power to these passive index funds. That is going to change the world. I don’t know what the consequences are going to be, but I predict they will not be good. I think the world of Larry Fink, but I’m not sure I want him to be my emperor.
It’s an amazing thing what you can do on a telephone. You can argue that Berkshire has been around on the telephone all its existence, in its modern incarnation. The directors at Berkshire meet face to face twice a year. They’ve always used consent minutes and phone calls to do their work. And its been more efficient and cheaper, and hasn’t hurt us at all. So the world, the rest of the world is coming to what Berkshire’s been doing for years and years. And my attitude is, “Come on in, the water’s fine.”
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