Charlie Munger Warned About 'Risky' Modern Monetary Policy: 'We Never Printed Money So Much and Spent It So Fast'

In his characteristic candidness, Charlie Munger, late vice chairman of Berkshire Hathaway Inc BRKBRK, shared his insights on economic cycles and government interventions, providing a nuanced perspective on the economic climate several years ago.

Here’s a look back at what he said and how it could apply today.

What Happened: In a 2019 interview, Munger acknowledged the cyclical nature of the economy, noting, “the economy sometimes booms, and sometimes it doesn't, and you have to live your life through both episodes.”

His pragmatic view emphasizes resilience and long-term thinking, advising individuals and businesses to remain steadfast regardless of economic fluctuations.

Munger reflected on the recent economic expansion at the time, expressing surprise at its longevity but recognizing the unprecedented measures taken to sustain it.

“We never printed money so much and spent it so fast and bought back so much debt, public and private,” Munger said.

This reference to aggressive monetary policies underscores the unconventional and experimental approaches taken by governments in response to economic crises.

Munger described these measures as “total terra incognita in economics,” highlighting the uncertainty and risk involved.

Munger’s strong insight into economic cycles could be one of the reasons why Berkshire Hathaway has often beaten the overall market. Shares are up 100% over the last five years, beating an 87% return of the S&P 500. A look at the Berkshire Hathaway chart from Benzinga Pro shows the five-year returns.

Zooming further out, Berkshire Hathaway is up 232% over the last 10 years, compared to a 183% gain for the S&P 500. Many longer periods of time show a larger gap of gains for Berkshire Hathaway compared to broad market indexes.

Read Also: Charlie Munger Said It Would Be ‘Stark Raving Madness’ For US And China Not To Become ‘Better And Better Friends’

Why It’s Important: Despite the risks, Munger conceded that the policies have been effective so far, stating, “Of course it was risky. But it worked.”

Munger's reflections suggest a cautious optimism, acknowledging the success of these interventions while remaining aware of their potential long-term consequences.

His advice to investors and policymakers is to remain adaptable and prepared for both favorable and unfavorable economic conditions.

Munger's perspective serves as a reminder of the importance of prudent management and resilience in navigating the complexities of economic cycles.

Read Next:

• ‘Common Sense’ Is Actually Uncommon: Charlie Munger Said ‘Standard Human Condition Is Ignorance And Stupidity’

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image created using photos from Shutterstock.