“Most People Have No Idea What Is Coming…” Charlie Munger’s Last WARNING – Is Bitcoin The Answer?

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 populist 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 and even after they went to an empire with an absolute ruler. They inflated the currency steadily for hundreds of years and, eventually, the whole damn roman empire collapsed so it’s the biggest long run danger we have probably apart from a nuclear war. Well, I think the safe assumption for an investor is that over the next 100 years. 

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The currency’s going to zero. That’s my working hypothesis: a very dangerous environment. What brought in Hitler was the combination of the Weimar inflation, which utterly destroyed the savings of the middle class in Germany followed by the great depression. It was a one-two punch and Hitler came in as a crazy demagogue with 40 % of the votes and pretty soon we had a dictator hell-bent on world war. So, the history is not pleasant and Germany was a very advanced and civilized nation Germany that Hitler took over. So, if you could let your nation deteriorate too much. What you get is a Hitler. We’ve proved when you print money on the scale that modern nations are printing it. Japan, the United States, Europe, etc.

We’re getting into new territory in terms of size. There’s never been anything quite like what we’re doing now. We do know from what’s happened in other nations that if you transplant too much money it eventually causes terrible trouble. We’re closer to terrible trouble than we’ve been in the past but it may still be a long way off I certainly hope so when Volcker after the 70s took the primary to 20 percent and the government was paying 15 on its government bonds that was a horrible recession lasted a long time, caused a lot of agony and I certainly hope we’re not going there again I think the conditions that allowed Volcker to do that without interference from about politicians were very unusual. I think in 2020 hindsight it was a good thing that he did it. I would not predict that our modern politicians will be as willing to permit a new Volker to get that tough with the economy and bring on that kind of a recession. So, I think the new troubles are likely to be different from the old troubles you may wish, you had a vocal style recession instead of what you’re going to get the troubles that come to us -they could be worse than what Volcker was dealing with and harder to fix. All the Latin American countries that print too much money.

They get strong men and so forth. That’s what Plato said happened in the early Greek city-state democracies one person – one vote a lot of legalities. You get demagogues and the democratic Gog’s lather of the population and pretty soon. You don’t have your democracy anymore. I don’t think that was a crazy idea on Plato’s part. I think that accurately described what happened in Greece way back then and it’s happened again in Latin America. We don’t want to go there. At least, I don’t. We’ve done something pretty extreme and we don’t know how bad the troubles will be. We’re going to be like Japan or something a lot worse. What makes life interesting is- that we don’t know how it’s going to work out. I think we do know, we’re flirting with serious trouble. I think we also know that some of our earlier fears were that Japan is still existing as a civilized nation in spite of unbelievable access by all former standards in terms of money printing. It is thought of as seductive; it is when you have a bunch of interest-bearing debts and you pay them off with checking accounts, which you’re no longer paying interest on. 

Think of how seductive that is for a bunch of legislators. You get rid of the interest, payments and the money supply go up. It seems like heaven and, of course, when things get that seductive. They’re likely to be overused if you start to think about it, if you’re going to invest in stocks for the long term or real estate, of course. They’re going to be periods when there’s a lot of agony in other periods when there’s a boom. I think you just have to learn to live through them and as Kipling said treat those two impostors just the same. You have to deal with daylight and night. Does that bother you very much? No, sometimes it’s night and sometimes. It’s daylight, sometimes it’s a boom, sometimes it’s a bust. I just believe in doing as well as you can and keep going as long as they let you, we have a hugely strong economy. 

It’s a hugely strong technical civilization and that’s not going away and knowledge and so forth. You can’t believe what a modern factory looks like when you fill it with robots and that’s coming more. It’s coming to China too for that matter and so those trends are inevitable. I don’t know how it’s all going to play out but I think it does create adjustment problems. If you have a fine unionized job and they replace you with a Yoba robot. You’ve got a difficult problem, if you’ve got a company like Kodak and they invent something new that obsoletes your product – you have a problem too and you solve that by dying. A lot of people don’t like that solution because all those problems are real and because it’s so tempting to get rid of your debt by just giving a guy a non-interest-bearing checking account, where you used to have to pay him interest every month not only do.

We have a serious problem but the solution to it that is the easiest for the politicians and for the federal reserve too for that matter is just to print more money and solve the temporary problems that way. That, of course, is going to have some long-term dangers and we know what happened in Germany when they had when the Weimar republic just kept printing money the whole thing blew up and that was a contributor to the rise of Hitler. So, all this stuff is dangerous and serious. We don’t want to have a bunch of politicians just doing whatever is easy on the theory that didn’t hurt us last time. So, we can double it and do it one more time and then we double it again.

So, fourth we know what happens on that everlasting doubling. You will have a very different government if you keep doing that enough and so you’re flirting with danger somewhere unless there’s some discipline in the process but I don’t regard Japan as in some terrible danger having they’ve done a huge amount of this and gotten by with it. I don’t think we’ll be as good at handling our problems as Japan is in my whole adult life. I’ve never heard of cash waiting for better conditions. I’ve just invested in the best thing. I guess I could find and I don’t think I’m going to change it now and the daily journals used up their cash now. Berkshire has quite a bit of excess cash but it’s not doing that because of those things. It knows how to time investments; it just can’t find anything he can stand by so we don’t have a solution to your problem. We’re just coping with it as I’ve described the reason. We’re not buying this. We can’t buy any things at prices. We’re willing to pay. 

It’s just that simple other people are betting the price up and a lot of the buying is not by people who really plan to own them a lot of it is feed ribbon buying private equity buys things. They can have more fees by having more things under their management, of course, it’s a lot easier to buy something when you use somebody else’s money, we’re using our own money at least. That’s the way we think of it, the shareholders who are worried about the future because it looks complicated and difficult in their hazard. I want to say to them what my old torch professor said to me, Charlie. He’d say Charlie tell me what your problem is and I’ll try and make it more difficult for you and he did me a favor by treating me that way and just repeating his favor to you, when you’re thinking the thoughts, you’re doing. At least, you’re thinking in the right direction, you’re worried about the right things. 

This article is a transcription of a video made by Jamiee Tree

Original video: https://youtu.be/Xf1BqEOrpf4