Charlie Munger: “Civilized People Don’t Buy Gold”

The 2nd in command at Berkshire Hathaway has said this sort of thing before. It’s not surprising that someone who has ridden the fiat currency wave his whole life (very well it must be added) should take such a position.

But despite the massive wealth Munger represents one can sense just a tinge of desperation in his statement.

“Civilized” people (read not hobbits obsessed with the barbarous relic) invest in “productive businesses.”

In a sense he’s right. One would be wise to invest in productive businesses. Investors would love to invest in more of them. He has nothing to fear there. The thing is Munger is not really concerned with how you or I invest our money. He’s not really concerned about how we provide for our families and our retirement. He is far more concerned with the reemergence of gold as a de facto reserve currency which puts the Berkshire portfolio at risk.

When Munger made similar statements in 2010 I commented on those statements.

As I state in the video, I offer my critique with respect. But this is the same man who said that with regard to the Great Recession individuals need to “suck it in and cope” and literally in the same breath said that the bank bailout should have been bigger.

Gold is an odd “investment.” It’s true. In many senses it’s not even really an investment. It’s just a store of wealth, but one of the few ways the average investor can hedge effectively against the current monetary regime. For instance if gold was to go to $3,000/oz some might celebrate. However most “hobbits” will know that this is just a sign of very nasty things in the broader economy. $3,000 gold means lots of other things are a lot more expensive too and that the political situation is likely that much more unstable.

So don’t begrudge the gold bugs Mr. Munger. They are just trying to keep their relatively small piece of the pie for themselves and their family. That seems to me to be the civilized thing to do.