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Source link: http://archive.mises.org/13976/munger-talks-his-book/

Munger Talks His Book

September 21, 2010 by

Warren Buffett’s partner at Berkshire Hathaway Inc. Charlie Munger told students at the University of Michigan “You should thank God” for the bank bailouts. Without George W., Obama and Bernanke, civilization as we know it would have gone down the drain, making a comparison to Weimar Germany.

“Hit the economy with enough misery and enough disruption, destroy the currency, and God knows what happens,” Munger said. “So I think when you have troubles like that you shouldn’t be bitching about a little bailout. You should have been thinking it should have been bigger.”

And for those in not doing so well in the downturn, the 86-year old Munger says “suck it in and cope.”

Why couldn’t the banks “suck it in and cope” Charlie? But then again that wouldn’t have been so hot for the Berkshire portfolio, which includes TARP recipients: American Express, Bank of America, M & T Bank Corp, US Bank, and Wells Fargo. And of course there was that $5 billion loan to Goldman Sachs in September 2008 when Wall Street was melting down. Then Goldman received $10 billion in TARP the following month. Charlie and Warren must be clairvoyants.

Mr. Munger is reflecting an elevated time-preference typical for those his age. “Like a child,” as Hans Hoppe wrote in Democracy The God that Failed, “he may only be interested in instant or minimally delayed gratification.” Forget the injustice and long-term damage of bailouts, if it’s good for Munger and Buffett we are supposed to thank God for it.


Ohhh Henry September 21, 2010 at 2:47 pm

Mr. French, I asked this question concerning one of Munger’s reported statements on another thread, perhaps you know the answer.

[Munger] suggested that burdening the economy with bank failures would have results similar to the economic collapse in Germany after World War I and led to the rise of Adolf Hitler.

Please correct me if I’m wrong, but weren’t bank bailouts one of the main causes, if not the primary cause, of the German hyperinflation which led to economic collapse and a few years later to the rise of fascism? If so then I think Munger should be called out on this, and these statements should not be allowed to stand.

Douglas French September 21, 2010 at 4:12 pm

Frank Graham writes in Exchange, Prices and Production in Hyper-Inflation: Germany, 1920-1923, “the risk of loss was thrown on the central institution [Reichsbank] which shed it in turn upon the public.”

“the commercial bank directorates largely recouped their losses at the expense of the Reichsbank, while the Reichsbank losses were only scraps of paper.”

So you’re right, Munger likely hasn’t done much work in this area.

As Rothbard wrote, “Bank failures are a healthy weapon by which the market keeps credit inflation in check; an absence of failure might well mean that that check is doing poorly and that inflation of money and credit is all the more rampant.”

newson September 21, 2010 at 9:21 pm

wasn’t the physical printing of banknotes designed to lessen the public debt burden, ie. war reparations?

Douglas French September 21, 2010 at 9:25 pm

That too…QE old school.

James September 21, 2010 at 2:52 pm

Wow….. Such bald elitism.
Surely this old windbag must fear for his life after stating something like this to the public.

J Cortez September 21, 2010 at 3:55 pm

A “little” bailout? What the hell is he talking about? What happened was one of the largest interventions in history. The man must be smoking crack if he believes it was “little.”

Bottom line, Munger is a hypocritical elitist fool and his stance is antithetical to free markets.

Ken September 21, 2010 at 4:02 pm

If it is done in the name of the King, it is good by definition. Filmer is the Thing That Wouldn’t Die.

Russ the Apostate September 21, 2010 at 4:04 pm

“And for those in not doing so well in the downturn, the 86-year old Munger says “suck it in and cope.””

That easy to say, if you’re a kajillionaire who’s 86 years old, and probably has no dependents.

HL September 21, 2010 at 6:33 pm

We should be thankful that Munger speaks openly what is otherwise just silently thought by those who run the show. It’s like when an environmentalist relaxes, takes a breath, smiles and acknowledges that all the blather about carbon and whatnot is a cover for reducing human populations. Select populations, mind you.

newson September 21, 2010 at 9:48 pm

good point. it’s also hard not to be taken in by warren buffett’s avuncular manner and imagine he’s just confused in his economics rather than completely cynical.

Alexander S. Peak September 22, 2010 at 1:41 pm

Dear HL,

Dr. Walter Block is a free-market environmentalist, correct? I would describe myself, likewise, as a free-market environmentalist.

Do you wish to ascribe this view to all environmentalists, or just certain environmentalists?

Respectfully yours,
Alex Peak

Mark September 22, 2010 at 10:10 am

I can understand how capitalism gets a bad name. The so-called capitalists in our society, Gates, Buffet, Munger and all the rest profit from government looting the people on their behalf. This is what capitalism looks like to people. Arguing that this isn’t really capitalism isn’t an effective argument. We need to change the name of these guys from capitalists to something else. Oligarch isn’t very effective. I personally limit the terms crooks and looters to the people with the actual power: representatives, bureaucrats and agents. What term could we call these non-capitalists that would be effective at illustrating their true nature without confusing them with government?

Michael A. Clem September 22, 2010 at 10:31 am


DayOwl September 22, 2010 at 10:36 am

Despite the fact that it came from Krugman, I really like the term Kleptocrat.

Alexander S. Peak September 22, 2010 at 5:44 pm

Dear Mark,

I have no problem calling those persons who profit from bailouts and corporate welfare “looters” and “crooks,” just as I have no problem calling your typical armed bandit a looter or a crook.

Regarding the term capitalist, you will get different answers from different libertarians. Rand, for example, seems to have used the word to mean proponents of capitalism, where capitalism refers to the free market, the system of free enterprise.

This is not the same sense in which Mises or Rothbard, from my reading of them thus far, seem to have used the terms. It seems they used the word capitalist in its original sense, viz., a private owner of the means of production. This meaning carries with it a completely neutral connotation, just as neutral as the word merchant. It seems, although I may be mistaken, that Mises saw capitalism as any system in which private ownership of capital goods takes place, and that Rothbard went back and forth between the Misesian and the Randian definitions. But, please bear in mind that I could be mistaken.

If we use the word capitalist to mean something entirely neutral, then we have no difficulty in saying that some capitalists (read: private owners of capital) are good people, and some are bad. We can also agree that some have acquired wealth through completely legitimate, voluntaryist means–what Oppenheimer would call the economic means; while others have acquired it through directly stealing, or through accepting the assistance of those who are “legally” permitted to steal–what Oppenheimer would call the political means.

One solution that Rothbard used was to describe the system he supported as free-market capitalism and another system, which he opposed, as state capitalism.

Recently, there has been a movement amongst left-Rothbardians to completely abandon the word capitalism, reverting its definition back to the pre-Marxian definitions, and instead using the terms free market and free enterprise exclusively in order to describe the system we support. This effort has been led by Brad Spangler and others. As these left-Rothbardians have pointed out, the term capitalism was coined by free-market anarchists, not to refer to the free market, but rather to refer to something that all libertarians ought to oppose, viz, state-driven monopolisation of capital. Thus, in this original definition, capitalism was to the private owners of capital what mercantilism was to merchants. Since a free society would have a free market devoid of statist intervention, neither capitalism (as originally defined) nor mercantilism would exist in a libertarian society, despite the fact that both the merchant and the capitalist would likely continue to exist.

With that said, “free-market anti-capitalism” seems to be a rallying cry for only two groups of people: (1) left-Rothbardians and (2) mutualists.

But, even those libertarians who tend to use conservative rhetoric, like Thomas J. DiLorenzo, can be found using terms such as crony capitalism to describe the political system through which businessmen exploit the public.

So, what terms should we use, and what definitions should we apply to them? Walter Block believes we should cling to the word capitalism because Rand found using the term a very successful tool for promoting libertarian political views. Sheldon Richman thinks we should abandon the term since it means too many things to too many different people, and since we don’t advocate what most people call “capitalism” anyway.

Personally, I don’t really care much what definition people use, so long as they (1) acknowledge to themselves and others that there are different definitions, (2) make sure they’re aware of what definition other people are using, so as to avoid talking past one another, and (3) clearly define their terms whenever they speak to those who might not know what definition they’re using.

Best regards,
Alex Peak

Stack Lavin September 22, 2010 at 6:54 pm

How about “CINOs?” – Capitalists in name only…

Harry Schell September 22, 2010 at 11:33 am

Met Mr. Munger a couple of times. He is a very rich and mean old man. I don’t begrudge him his wealth, except when it is preserved by my tax dollars and pathetic leadership such as Junior, Summers, Bernake, et. al. He saw things others didn’t and made some really good investment decisions. That he and Buffet think they should pay more taxes, well, the feds will take checks, boys. Just send it in. Give back, as it were. You don’t need to see my tax rates go up for you to write your checks…or do you?

I don’t run with that group of people anymore, which is just fine. I begrudge Charlie Munger another second of my time.

Ravi Nagarajan September 30, 2010 at 5:13 pm

Munger’s comments have been taken entirely out of context. Here is a link to both the actual speech and my interpretation of what he had to say.


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