Collection: Charlie Munger - #53 'U.S. National Debt > GDP, What's Next?'



[Transcript]

AUDIENCE MEMBER 00:08

My question relates to the country’s national debt. We’ve just recently passed twenty two trillion dollars and our debt to GDP is above 100 percent now. At a time when our GDP may be near a peak and interest rates may be rising. It seems to me that politicians seem fine running the deficit because there when the crisis comes, and consumers are happy to take a deficit because it’s better to consume now than tomorrow.


My question is, do you think that there’s something we can do about this? And if so, what should be done? Or is human psychology such that until the crisis is upon us, it’s hard to imagine anything it’s done?


CHARLIE MUNGER 00:45

Well that’s a very interesting question. The whole science of economics had no idea 15 years ago that it would be possible to print money on the present scale, and get so awash in internal debt as we have.


And certainly in a place like Japan, which is way more extreme, nobody dreamed that was possible. And the people who did dream what was possible – and they were few – they would not have predicted 20 years of stasis in spite of everything the Japanese did which was very extreme.


There’s a lot that’s peculiar in what we’re doing and eventually if you try and solve all your problems by printing money there’ll be some disaster. When it’s coming and how bad it will be, nobody knows. Nobody dreamed 15 years ago we could do as much as we have now with as little bad consequence.


And so the – Churchill use to say that Clement Attlee had a lot to be modest about. Well that’s the way I feel about the economics profession. They have a lot to be modest about. They thought they knew a lot, but turned out not to be so.


There was a Greek philosopher that said, “No man steps in the same river twice.” You know the river is different the second time he comes in and so is the man. And that’s the way with economics. It’s not like physics where the same damn principles are going to apply. You do the same damn thing at a different time and you get a different result. It’s complicated.


And of course you’re raising a very important question. And of course nobody really knows the answer. Who knows how much of this we can get by with. My personal bet is that these democracies will eventually borrow too much and cause some real troubles. I don’t know when.


(Source: https://youtu.be/X1Oi3esiry8)

 

[YAPSS Takeaway]

"There was a Greek philosopher that said, “No man steps in the same river twice.” You know the river is different the second time he comes in and so is the man. And that’s the way with economics. It’s not like physics where the same damn principles are going to apply. You do the same damn thing at a different time and you get a different result. It’s complicated." ~Charlie Munger