Collection: Charlie Munger - #119 'U.S. Economy'


Video Link: https://youtu.be/e9RnkHLv3P0


In this episode, Charlie Munger was asked regarding on U.S. economy and what is his take on where things are right now?


In this episode, you’ll learn:

  • Charlie Munger on U.S. Economy [Economic Cycle, Federal Debt, QE, etc].

  • Charlie Munger on U.S. Politics.

To check out all Collection: Charlie Munger <click here>

[Transcript]

(Source: https://finance.yahoo.com/news/influencers-transcript-charlie-munger-105001910.html)

ANDY SERWER 00:00

Let me shift gears a little bit, Charlie, and ask you about the US economy. And what is your take on where things are right now?


CHARLIE MUNGER 00:08

Well, obviously, they're booming. But, you know, the economy sometimes booms, and sometimes it doesn't. And you have to live your life through both episodes. And our idea is we just keep swimming. And sometimes the tide is with us, and sometimes against. But we keep swimming either way.


ANDY SERWER 00:31

Are you surprised by how long this expansion has lasted?


CHARLIE MUNGER 00:35

Of course, it's lasted a long time. But what was really remarkable is that we never printed money so much and spent it so fast and bought back so much debt, public and private. So this is total terra incognita in economics. And nobody knew for sure how it was going to work.


ANDY SERWER 00:55

So was it risky then?


CHARLIE MUNGER 00:56

Of course it was risky. But it worked. And I don't think they had much else that it would work. They weren't set up to do stimulus – too much controversy. Democratic inertia is very thin. So they had to do something. And all they had left was just to print money and start buying things. And that's what they did. And it turned out to be a very wise response. And what's even more remarkable is that both Congress and the presidency and both parties made the same decision. They all cooperated. It was the last time.


ANDY SERWER 01:36

But where's that going to leave us ultimately?


CHARLIE MUNGER 01:38

Well, it left us licking the Great Recession. So maybe we ought to try cooperation again since that worked so well once.


ANDY SERWER 01:45

How much is President Trump responsible for this current economic situation?


CHARLIE MUNGER 01:51

Well, I think he deserves some credit, but a lot of it just happened.


ANDY SERWER 01:56

Economic cycle?


CHARLIE MUNGER 01:58

Yeah. And the decisions of his predecessors.


ANDY SERWER 02:04

What do you think about the president's campaign to lobby the Fed to lower rates or keep rates low?


CHARLIE MUNGER 02:15

Well, I think presidents have always done this. If you're a politician in a democracy, of course you want people to earn money and spend it. And of course, that's not a good idea. The best example probably in the whole world is Singapore, which has zero debt and never prints money and spends it. And it's one of the most successful places on Earth. I wish we were like that, but there's only one Singapore.


ANDY SERWER 02:47

Well, some people now say that federal debt is not a problem at all.


CHARLIE MUNGER 02:52

Well, if you believe that, you believe in the tooth fairy. Because then we don't have to have any more taxes ever. We'll just print money and live happily ever after. It obviously won't work.


ANDY SERWER 03:02

So –


CHARLIE MUNGER 03:03

There comes a point when printing money is counterproductive.


ANDY SERWER 03:06

Are we at that point? Are you concerned?


CHARLIE MUNGER 03:07

No, I don't think we are at that point. But nobody knew where the point was going to come. And we don't know now. None of these people who are so pompously sure of things, because we all want reassurances, so they provide it. But nobody really knows how much of this is too much.


ANDY SERWER 03:28

And do you have any thoughts on Jay Powell and the job that he's done?


CHARLIE MUNGER 03:32

Well, I think a lot of him. I think he's as good a choice as we could have made.


ANDY SERWER 03:37

One consequence of this expansion or actually, it precedes that. It's just something that's occurred in our economy over the past 50 years really has been wealth and income inequality.


CHARLIE MUNGER 03:48

Yeah.


ANDY SERWER 03:49

One, do you see it as a problem? Two, if so, how do we address it?


CHARLIE MUNGER 03:54

Well, it's a problem if enough politicians are screaming about it. That makes it a problem. If it weren't for that, this one will go away by itself. It happened by accident. We were in desperate trouble. We were on the eve of a great recession that could have been a great depression and then followed by the rise of people like Adolf Hitler and so on and so on.


So we faced a real catastrophe. The only weapon they had with this huge-- was to print money and spend it. And they did it. Of course, and they drove interest rates down to zero, or real interest rates. Well, of course, that lifted asset values for the people who were already rich. Nobody was trying to make the rich richer. It just was an accidental byproduct of a correct governmental decision made on a bipartisan basis. And since it was a weird byproduct that occurred in a weird time, it will go away by itself in due course.


ANDY SERWER 04:53

It will go away by itself?


CHARLIE MUNGER 04:55

Sure.


ANDY SERWER 04:55

So there's no reason for –


CHARLIE MUNGER 04:58

The people who are screaming about it are idiots. It's going to go away by itself. And that's not to say that we can't raise the minimum wage a little or enlarge the social safety net a little. We should be doing that as we prosper. Both parties agree on that.


ANDY SERWER 05:19

What do you think about the proposals put forth by Alexandria Ocasio-Cortez and Elizabeth Warren that would greatly address this problem?


CHARLIE MUNGER 05:31

Well, I don't consider those two necessarily the best prescribers in the world. They're kind of likeable. I particularly kind of like Elizabeth Warren. She's got a manner that appeals to me.


ANDY SERWER 05:45

Really?


CHARLIE MUNGER 05:46

But I don't agree with her attitude. I don't think she's studied Adam Smith enough.


ANDY SERWER 05:55

And what about AOC? Do you have any take on her?


CHARLIE MUNGER 05:58

I don't think she knows who Adam Smith was.


ANDY SERWER 06:04

I want to ask you just a few more questions about politics, and we can talk about the markets and Berkshire a little bit more. What about the situation that we find ourselves in with the Mueller Report and the way Congress and Democrats are fixating on that and the president's on the defensive? What is your thoughts thinking on that?


CHARLIE MUNGER 06:24

I tend to avoid the whole subject, just as I ignore – tide with me, tide against, and just keep swimming. But both parties are so partisan now that they're blinded by their anger. And I don't want to be blinded by my anger, so I control it. And I would recommend it to both parties. I think they should all cool it.


ANDY SERWER 06:51

Why are we so divided up, Charlie, right now in this country?


CHARLIE MUNGER 06:55

Well, anger, when you pound on one another, feeds on itself. That's one of the great difficulties with it. It's irrational and it feeds on itself. So I liked the world when it was Dwight Eisenhower against Adlai Stevenson, and more similarly, and Ronald Reagan and Tip O'Neill got along. And a lot of it was done. My war was a bipartisan war. And in the aftermath, foreign policy in the United States was a bipartisan policy. I liked that world better. I hate this extreme hatred on both sides.


ANDY SERWER 07:37

Will we ever get back to those days or get to new days where we don't have the hatred?


CHARLIE MUNGER 07:41

Probably. You live long enough, a lot of good things happen and a lot of bad things happen.

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