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charlie munger warren buffett's right-hand man recently appeared on yahoo finance for a two-hour q a session where he spoke about a wide range of controversial topics in today's video i break down the incredible interview summarizing the highlights focusing on the few comments that were simply shocking we start with inflation as we all know prices all over the place have been rising at a record-breaking pace this has caused many to worry that we could be entering a stagflation period like the 1970s or even worse a hyperinflation period like weimar germany in the 1920s becky quick did an amazing job pressing 98 year old mr munger on his thoughts given the current situation the questions she poses are quite complex on their surface but essentially what they boil down to is whether or not mr munger believes the federal reserve will have to raise the rates to absurd double digits in order to control inflation now monger's answers to these questions were very long and in hindsight it's interesting to hear someone give both sides of the argument when it comes to this specific topic that at least on youtube is flooded with videos claiming only one thing hyperinflation and doom before i show you his first response you have to understand one thing when the united states previously experienced inflation as high as we're seeing it today they fixed it by raising the interest rate all the way to 20 percent this was done by a man named paul volcker who essentially brought the us into a massive recession with his swift actions but these actions cleared the path for prosperity later on his extreme policy choices fixed inflation but they came with a massive short-term cost now monger's take on this is quite stunning take a listen uh charlie steve where are we going with there's no we've there's never been anything quite like what we're doing now and we do know from what's happened in other nations if you if you try and print too much money it eventually causes terrible trouble and we are closer to terrible trouble than than we've been in the past but it may still be a long way off i certainly hope so me too steve caspell writes in on on this same subject he says what are your current thoughts on the inflationary environment and please compare and contrast it to the 1970s well when we when volcker after the 70s took the primary to 20 percent and the government was paying 15 percent on its government bonds that was a horrible recession lasted a long time caught a lot of agony and i certainly hope we're never we're not going there again i think the conditions that allowed volcker to do that without an interference from about politicians were very unusual and i think it in 2020 hindsight it was a good thing that he did it i would not predict that our modern politicians will be as willing to permit a new volcker to get that tough with the economy and bring on that kind of a recession so i think the new troubles are likely to be different from the old troubles i certainly hope we are not going there again that is what mr munger thinks about raising the rates to those absurd levels but that leaves the question without raising the rate and putting the economy into a government-induced recession what choices are left for economists attempting to resolve our massive inflation problem in fact by his own admission we are flirting with serious danger study history and you'll find that most democracies and empires in general fail because of massive money printing we've talked about this many times before on this channel but allow me to remind you that even the roman empire eventually collapsed at least partially due to the fact that they severely devalued their currency over the course of a couple hundred years these similarities can be found throughout history and the united states is no exception mr munger understands the dangers and emphasizes what could happen if we allow this to spiral take a listen to his wild and passionate response if the ugly scenario plays out this is related these are all you may wish you had a vocal you may wish you had you had a vocal style recession instead of what you're going to get the troubles that come to us could be worse than what volcker was dealing with and harder to fix like what well think of all the think of all the latin american countries that print too much money they get strong men and so forth that's what plato said happened in the early greek city-state democracies one person one vote a lot of legality and you get demagogues and the democrat guns lather of the population and pretty soon you don't have your democracy anymore i i don't think that was a crazy idea on plato's part i think that accurately described what happened in greece way back then and and it's happened again and again and again in latin america we don't want to go there but it's not all bad monger does provide an alternative scenario one that showcases what could happen on the positive side he uses the example of japan as the foundation of this argument in fact starting in the 80s the japanese central bank began buying up private assets to recapitalize businesses and prop up prices that would be like the federal reserve today buying up the s p 500 and individual companies within it by all modern standards these actions should have marked the start of hyperinflation but in reality japan has remained relatively stable one could make the argument that it's had its problems as a result of these policies for one economic growth has stagnated and following the bubble popping in 1990 the japanese stock market has not made much progress since but overall japan advances as one of the most developed countries in the world and it does so with relatively low inflation and a high standard of living could this potentially be the future of the united states according to monger yes it's possible but he also cites a couple of key differences that may make it difficult in fact he spends a lot of time talking about japan when asked these inflation questions but he always provides you with both sides of the story never being too pessimistic or too optimistic take a listen to his unique analysis um yeah charlie i'm going to ask a couple more of these inflation questions because it's in a similar vein but they're they're nuanced and there's slightly different aspects this is something from simon jacobs who says conventional economic theory argues that excessive monetary and fiscal stimulus over the last two years has triggered the highest inflation in 40 years do you broadly agree with this thesis and more importantly do you think there will be a high economic price to pay as the fed attempts to bring inflation back under control i guess um the reasons for it um well the first part i agree i agree with that we've done something for we've done something pretty extreme and we don't know how bad the troubles will be whether we're going to be like japan or or something a lot worse and what makes life interesting is we don't know how it's going to work out i think we do know we're flirting with serious trouble i think we also know that some of our earlier fears were we're overblown japan is still existing as a civilized nation in spite of unbelievable access by all former standards in terms of money printing ultimately what this boils down to is simple nobody not even charlie munger not warren buffett nor peer chef have any idea what the future holds what we do know is based on history and we are currently flirting with extreme danger but predicting when this danger boils over into hyperinflation or something equally as serious is impossible to predict we have to keep in mind that this situation is quite unique the us is the top dog it holds the reserve currency status and it's not the japan of the 90s the culture the demographics the currency situation and the political situation are all massively different we know history rhymes and it tends to repeat itself on occasion but given the advances and developments in the last 20 years comparing and contrasting previous events may be a fool's game we simply don't know we know inflation has always been a problem for governments for thousands of years and given this fact it will likely continue to be an issue that we fight with whether you agree with mr munger peter schiff or kathy wood the truth is nobody can really predict the short-term future as always thank you guys for watching please don't forget to by the way i want to take a moment and thank every one of you by the time this video comes out the channel will very likely cross the coveted 100k mark thank you for all the wonderful comments likes views and messages it's been a wonderful three years sharing financial stories with all of you and i look forward to doing it for many more
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