Everyone knows the name Warren Buffett and his company Berkshire Hathaway. But the name "Charlie Munger" is far less recognized. Charlie, an 86 year old billionaire in his own right, is a long time partner of Buffett at Berkshire where he serves as Vice Chairman. Charlie takes to writing little parables now and again to help explain his view of things to the unwashed masses. His most basic one is entitled "Basically It's Over". In it he describes a place called "Basicland" which is obviously a reference to the USA. He goes on to describe how things started off great and then began a long slide down a slippery slope to the point where it needed to be renamed "sorrowland".
Lots of people look up to Munger and Buffett and other rich people who appear to "tell it like it is". The problem I see is that the stories they tell are always skewed and flawed. They tell partial truths (a trademark tactic of the illuminati) so that people without the proper background believe they know what is going on because they heard it from such a bigwig insider. Boiling down Munger's partial truth from the Basicland parable, people stopped working and began to gamble. Sounds logical, right? Engineers, he wrote, worked on financial stuff instead of something actually productive. The problem, he writes, is that debt was used addictively as leverage in speculating (gambling) on all things. He even goes on to state that we ignored the warnings of Keynes on the matter of excessive speculation.
Despite all of these half truths, Charlie never gets to the heart of the matter which is that all of the ills he writes about are just predictable symptoms of fiat currency and fractional reserve lending. Without a rubber band money supply that can be expanded at the whim of anyone wanting to borrow money at interest rates which are manipulated to an artificially low rate by the central bank, none of the problems pointed out by Charlie could ever have occurred.
- If banks had to limit lending to the deposits on hand then speculation would be limited simply because there would be no easy money to throw at it. But when banks are allowed to loan 10, 20, 30 or 50 times what they have on deposit then even the worst bets will have some takers because the money is so easy to come by and the penalty for failure is nothing more than a black mark on your credit for a few years. Whenever you have a system where there is so much reward with so little real risk you have to expect people to take advantage of it. Thus, the flaw is woven into the very fabric of the system. Fractional reserve lending was corrupt at its very inception and the con men who started the federal reserve bank knew damned well.
- If interest rates are too high then people will not borrow money to gamble with. But when the central bank manipulates the interest rates down to artificial lows in order to prop up an economy which knows it is too far in debt, the feedback loop of the free market is broken and so the system is broken. Abolish the fed and let the free market control interest rates and you will never see a bubble like we have now.
The oligarghs like Charlie are lamenting the predictable end of a fundamentally flawed and corrupt system which they themselves successfully gamed to the tune of billions. Charlie talks about the ills of engineers (a proxy for anyone doing productive labor which is the real lifeblood of every economy) being drawn toward gambing in finance but he himself never worked outside the FIRE industry in his entire life and he is worth almost 2 billion. Did Charile work productively to earn that money? Hell no. He achieved it by speculating (leveraging gambling) better than others. Charlie comes from the "do as I say and not as I do" camp. He thinks there is good gambling and bad gambling. He blames all the problems on those people who let their gambling get out of control and what he suggests is regulation. However, what he really wants is for the unwashed masses to be regulated while the illuminated big money gets to continue to make big profits from the use of ridiculous leverage. Charlie is really lamenting that "rif raf" have upset his easy money applecart. They have watched the moves of him and people like him and they tried to emulate that. But Charlie seems to forget that his earlier attempts at speculation in the mid 1970s ended badly.
Here is another good example of illuminist half truths from the parable:
"Among the suggestions of the Good Father were the following. First, he suggested that Basicland change its laws. It should strongly discourage casino gambling, partly through a complete ban on the trading in financial derivatives, and it should encourage former casino employees—and former casino patrons—to produce and sell items that foreigners were willing to buy. Second, as this change was sure to be painful, he suggested that Basicland's citizens cheerfully embrace their fate. After all, he observed, a man diagnosed with lung cancer is willing to quit smoking and undergo surgery because it is likely to prolong his life. The views of the Good Father drew some approval.... But others, including many of Basicland's prominent economists, had strong objections. These economists had intense faith that any outcome at all in a free market—even wild growth in casino gambling—is constructive.
This paragraph basically laments that the suggestions of Paul Volcker (AKA the "Good Father") to add regulation to the banking industry were not universally accepted and that economists argued that "any outcome at all in a free market—even wild growth in casino gambling—is constructive". I see the first part of this as Munger supporting regulations on the rif raf so that leveraged financial gambling can be returned exclusively to the good old boy club where it belongs. In case it is not clear, the big money always gets around regulations. They have armies of lawyers and lobbiests and special access to politicians (AKA bribes) that are not available to the smaller players. I also find it ironic that Munger suggests that such regulations would "encourage" the casino employees to return to productive careers even though Charlie himself never worked a productive job in his life and now has nearly 2 billion net worth. Double standard, anyone?
The second part of it is simply laughable but contains an important point. Many in the media claim that the crisis shows that free markets do not work. In other words, we need heavy handed governement regulation and more government involvement in the economy (which eventually means in all aspects of our lives). Again, it sounds true and correct to people who do not understand the scam of fiat currency and fractional reserve lending whose interest rates are controlled by a corrupt central bank. Because we have manipulated interest rates there is no free market. So the crash actually proves that central regulation of the economy did not work and of course it never has worked throughout history. Free markets rely on a self controlling feedback mechanism: when good things happen they are rewarded and when bad things happen they are punished. But in our absolutely NON free market economy, the losers are rewarded and saved from bankruptcy and government picks who the winners and losers are. This is soooo not a free market and it really irks me when people who certainly know better try to brain wash the masses into believing that it is a failed free market.
