Was it right to bail out the banks using quantitative easing (QE – money printing) following the 2008 financial crisis? Many people argue that today’s political turmoil is a direct result of the decision by central banks (led by the Federal Reserve in the US, under Ben Bernanke) to take monetary policy to extremes. Yet Charlie Munger (pictured, below right), vice chairman of Berkshire Hathaway and the long-term, slightly less famous business partner of Warren Buffett, is in no doubt.
“I think it was absolutely required,” he tells Becky Quick of CNBC in a recent interview. “The danger they were avoiding was worth some of the troubles they caused.” Munger, 95, acknowledges that “it did have the accidental effect of bailing out the rich in order to help the poor”. However, “nobody was doing that because they love the rich. They just… had to do something… It wasn’t malevolent… it was the wisest thing to do, given the… trouble we were in”.
Munger also warns (as has Buffett) that today’s investment environment is tougher than in the past. Firstly, valuations are currently very high.
But more generally, “the competition sorting through those opportunities is more intelligent and more aggressive and more numerous. Of course it’s harder“. As for the ever-growing US national debt, it’s “in uncharted territory”, he observes. Does he worry about it? He tries not to, he says. “In every era… a great nation will, in due time, be ruined… our turn is bound to come. But I don’t like thinking about it too much.”