Charlie Munger: How We Can Restore ConfidenceWednesday, February 11, 2009; Page A19 Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes. http://www.washingtonpost.com/wp-dyn/content/article/2009/02...
Funniest line: "Surely both political parties can now join in taxing the 'carry' part of the compensation of hedge fund managers as if it was more constructively earned in, say, cab driving."
A well thought out article as would be expected by CM.The real tragedy in this whole fiasco, is how these paper pushing master of the universe types have besmirched the value of Capitalism as a system to help people economically better themselves. They have given Union loud mouths, champagne socialists and highly dubious do gooders of the health and safety sort a massive stick with which to bludgeon those who work in, work for and have ownership in companies that produce tangiable goods and services.
Moderate booms and busts are inevitable ... But a boom-bust cycle as gross as the one that caused our present misery is dangerousIf Congress took their responsibility seriously, they would find a way to flatten out the business cycle out a little bit.Why they haven't tried this before now is beyond me."Public deliberations should include ... issues of public morality, particularly with regard to taxation"Public morality is necessary in this case because private morality is inadequate to the task.For example, some admit not paying enough in taxes, but stop short of donating extra money to the IRS."The United States has long run ... deficits..."Ah, there's a problem I'm sure we can all agree upon.Solution...?"duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes."Cool, so if we raise taxes high enough, Congress will run out of ideas to spend it on?That's easy to understand. I like it."increasing taxes in some instances might easily gain bipartisan approval"I didn't think I'd see the day, but it appears someone has found a way to bring Republicans and Democrats together.Our golden age of bipartisanship can begin as soon as the Republicans stop obstructing higher taxes."it is conceivable that ... improved safeguards in our financial system could reduce national pain instead of increasing it."In this era of hope and change, anything is possible.I trust the government....Seriously, though, I hoped for better from Mr. Munger.
Charlie Munger is a Republican?
"Charlie Munger is a Republican?"Yes he is a lifelong Republican.Many would probably call him a RINO (Republican in name only), but that is only because he is a thinking pragmatic rather than the idealogue that much of the Republican party has become today.
"Seriously, though, I hoped for better from Mr. Munger."Invert it.I am sure Mr. Munger expected better than the idealogical, twisted interpretations he got from you.
Now why not read the article inserting BH at each relevant point? Not least the silly equity puts- and as for the argument float that falls flat on its face as it is an all-or-nothing bet.Oh and don't forget that the real reason the US insurance industry isn't totally tanked is because the Holding Company cannot bleed the InsCo's dry. In my opinion BH parent is dangerously leveraged, but we have to wait for the next financials.On a bad day it really is conceivable to think that the BH parent would be bust (Chapter XI) but GEICO as strong as ever (and Swiss Re bust)
In my opinion BH parent is dangerously leveraged, but we have to wait for the next financials.On a bad day it really is conceivable to think that the BH parent would be bust (Chapter XI)If you don't mind, please lay out your reasoning for your opinion, with facts and figures.
Charlie says today's Congress should refer to the Deliberative Rules of the Constitutional Convention of 1787http://www.teachingamericanhistory.org/convention/delegates/...Those rules involved 12 Action Committeees which expedited the Constitutional Congress' work. I think Charlie sees the need for urgency in making necessary reforms.
Neurosis is always a substitute for legitimate suffering. – Carl JungShould we opt for even more pain now to gain a better future? - Charlie MungerSame thing.If the actions of our politicians represent the desires of our people, the answer to Charlie’s question would be, “No, not yet.” If the answer was, “Yes, now,” the so-called stimulus package would forgo funding and establishing pet projects and instead focus entirely on things that would in fact stimulate the economy now. The political class has loudly declared that they are unwilling to let go of any personal current advantage for the long-term good of the country. As Jung would describe it, they have chosen more neurosis over the legitimate suffering that honest responses would require.The purpose of suffering is to encourage, or even force, some kind of change. The higher pain’s threshold, the greater the suffering must be to cause the needed change. As painful as our current economic condition is now, it evidentially is not painful enough to get the nation to do what is really needed. We aren’t hurting enough yet.Charlie notes: The United States has long run large, concurrent trade and fiscal deficits while, to its own great advantage, issuing the main reserve currency of a deeply troubled and deeply interdependent world. I will get to the trade and fiscal deficits and the function of the dollar as a reserve currency in a minute. But some other considerations.Several decades earlier, in the Saving and Loan debacle, the federal guarantee of deposits allowed these institutions to borrow virtually unlimited amounts of money as long as they were limited to $100,000 at a time. The result was the purchase of large amounts of bad assets with the guaranteed borrowing and a financial disaster. But, the lesson was not learned.More recently, the perceived guarantee of the debt of Freddie Mac and Fannie Mae, along with the ability of commercial bands to push virtually unlimited amounts of assets upstream resulted in the financial disaster we are now enjoying. This mess was exacerbated not only by perceived federal guarantees, but by grossly inaccurate credit ratings, mortgage insurance and derivatives. Still, the lesson is not learned, for we continue to choose neurosis. Our neurosis is enabled by the role of the dollar as a reserve currency. The willingness of foreigners to hold dollars has given Americans the belief that our federal government has an unlimited ability to borrow. Our neurotic drug of choice is debt – funding trade and budget deficits as far as can be seen. Since we can borrow, we can spend; and spend we will. If there are lessons to be learned from our current crisis and the earlier Saving and Loan meltdown, it is that unlimited debt enables very bad financial behavior, especially badly designed spending. So, when is our pain threshold exceeded? I can think of two things that will force, even us, to quit the binge.At some point foreigners may decide that they have enough dollars, thank you, and are unwilling to increase their ownership of treasury securities. The other thing that may stop our spending binge is already determined. Some day the amount of funds required to pay our promised entitlements will become so great that the ensuing pain will force change. Charlie wonders if we will step back before those two nightmare scenarios become a reality. If our present actions are an accurate indicator, the answer is, “No.”
As long as the two dominant political parties bicker, name call and posture for re-election by buying the next election with our money, we are sure to fail economically before we succeed. Right now our country is being run by committee, and not the quality seen in the founding of this country. It Ironic that congressmen and senators obligate current tax revenues and future revenues and show no respect for how even one dollar of it is spent, for them it is free money, then they turn around and Create the Tarp over objections of the tax payers, then demand that ceos do the low crawl to washington out of respect. The true costs of these bail outs are un forseeable.As Mr. Munger writes. "No Leadership". For that we will all pay.
<<As long as the two dominant political parties bicker, name call and posture for re-election by buying the next election with our money, we are sure to fail economically before we succeed.>>You mean we'll eventually succeed?
"You mean we'll eventually succeed?"I was writing optimistically. Eventually is eventually. Maybe I was too optimistic. I forgot to factor in all the entitlement programs.
My proposal is that we do not need extensive new regulation to prevent a reoccurence. What we need is simple in essence - a regulation against excessive debt. Whether or not that debt is taken on my companies, banks, individuals or our nation, it is poison in excess. This whole problem would have been avoided if excessive bank leveage and unsupported debt by individuals had not be occured.sw
Neurosis is always a substitute for legitimate suffering. – Carl JungShould we opt for even more pain now to gain a better future? - Charlie MungerSame thing.hence neurosis is economics....and the great depression was only mental illness.......ofw......you might have missed it, but millions of people are or are going to be unemployed....and homeless......how much suffering.....or in your words of skipping the neurosis based on Jungian ideas do you need? phychology is hardly economics in anyone's book.....but there is always sociology which might satisfy your silly approach......Dave
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