Charlie Munger's insane, ignorant and illogical "cultural theory of keynesian intervention efficacy" about 4 and a half minutes in. Oh and then right after that he calls Krugman "one of the smartest people we have". He "has no problem with the Federal Reserve System" and that Greenspan "overdosed on Ayn Rand" (has the great polymath ever READ Ayn Rand? I don't remember Ayn Rand ever writing in favor of a central bank induced economic boom?
Munger and Buffett have gone completely bats. Conant is 100% correct in his comments about Munger.The U.S. is going directly down the same road as Greece, as is Germany, China etc. Keynesian economic policy doesn't work anywhere. If you print money and cause a manipulated boom, there will be consequences to pay. The consequences will be more painful the more socialist in thinking a population already is, but every country that buys into the mad economics of John Maynard Keynes is stuck having to pay the Keynesian check on the downside of the Keynesian created business cycle.
As for Krugman being "one of the smartest people we have". I'd like to see Munger turn over a chunk of his portfolio for Krugman to manage, based on Krugman's concern of developing deflation.
Finally as far as Ayn Rand goes, she was not an economist. Indeed, she didn't even understand how the government propped up the banking system:
I became her financial adviser in the last few years of her life, so we talked about her finances... I asked what did she have, how did she have this invested. She had it across the street at a savings bank. I guess the utter horror that I felt was apparent just looking at me.
She had always expressed the view she didn't want to be in government bonds, because of it being government. I said, “You know the savings banks, the only thing that's keeping them afloat is the government."
They were probably the riskiest place to have money over the minimum that the FSLDIC insured, because they were borrowing short and lending long. After that conversation, we started changing what her investment holdings were.Rand was a novelist and a philosopher, her advocacy of capitalism came from that perspective. There is no indication at all that she understood the business cycle, how the Fed operated or anything close to that. For Munger to charge that Rand influenced Greenspan in his Fed thinking is absurd and totally laughable.
Bill Fleckenstein takes the two to task
ReplyDeletehttp://www.businessinsider.com/bill-fleckenstein-warren-buffett-charlie-munger-gold-taxes-2012-5
Greenspan was an early member of the collective and mentions Rand favourably in his autobiography.
ReplyDelete'...he calls Krugman "one of the smartest people we have".'
ReplyDeleteThe key point here being figuring out who is "we."
I've never seen such a knowledgable man in the world of investing sound like such an ignorant man in discussing macroeconomics.
ReplyDeleteMunger's use of "virtue" is reminiscent of Keyenes references to "animal spirits".
It's interesting that Munger says he has a "deep distrust" in master planning not 10 minutes after defending the central bank intervention around 08'.
I feel like I just finished watching a schizophrenic expound on his macroeconomic views.
The "moving business" example is good though, I did the same exact thing. I actually paid for the "LLC" for some of my former employees(now contractors).
It's also interesting that he "chastises" GM for screwing the bondholders, but doesn't recognize that it was gov't that helped them do it.
He wants to eat his cake and have it too.
He sounds a bit envious of the high frequency traders too. Mugner laments "liquidity" yet defends central banking....that's crazy.
I think watching this vid made me dumber in the big picture.
Lastly, how disgusting it is Munger bemoans lobbying at the end?
Last year everyone knows Berkshire invested heavily in rail, take a look at this link and since the intervention in 08' look at not only the lobbying activity(to save thier asses) but specifically the amount flowing into rail:
opensecrets.org/lobby/clientsum.php?id=D000021757
What a disgusting double talking crony pig.
surely not this taylor conant?
ReplyDeletei can deal with a krugman: he's so far gone, he's just holding on to his nine-to-five at this point, the consequence being they will print any old howlers (not my word, thanks bill anderson) under his name that they please.
it's these young frauds, self-styled pragmatists in a sea of ideologues, that i can't stand. krugman's editor, whoever he is, is surely one of them.
jon,
DeleteThe very same. And historically of EPJ fame, as well.
:)
You write: "For Munger to charge that Rand influenced Greenspan in his Fed thinking is absurd and totally laughable." Are you kidding? Do your homework, please.
ReplyDeleteIn Alan Greenspan's memoirs (The Age of Turbulence) he writes on page 52: "It did not go without notice that Ayn Rand stood beside me as I took the oath of office in the presence of President Ford in the Oval Office. Ayn Rand and I remained close until she died in 1982, and I am grateful for the influence she had on my life. I was intellectually limited until I met her."
You are dead wrong in your the statement above.
So what exactly did Rand tell Greenspan about excess reserves and the Fed discount rate?
DeletePlease, Rand had zero influence on Greenspan's operations at the Fed, because she didn't no a damn thing about Fed operations.
Munger and you are way off.
Anonymous (and all other clueless, dishonest or ill-informed Ayn Rand-haters),
DeleteGreenspan's close intellectual and personal relationship with Ayn Rand is not, by itself, evidence that she influenced his views on monetary economics. Frankly, it is not evidence that she influenced any particular view of Greenspan's at all. To make that case, you'd have to cite examples of where something she said or advocated was put in place by Greenspan as a political figure and monetary authority at the Fed.
Munger makes the same confusion. He observes, rightly, that Greenspan "admitted he was wrong" and that he was "the only one to do so." But he doesn't qualify the statement by pointing out that what Greenspan "admitted he was wrong" about was Greenspan's supposed belief in laissez-faire, regulation-free markets. Greenspan, the instigator of the inflationary boom, never apologized or reconsidered his role in that affair. No, he took the politically correct route and apologized for the "terror of free markets" that occurred while he was Fed chief... a terror that didn't exist by his own definition!
How is this? you might ask. A couple years ago, in the midst of the first crisis in what Charlie Munger calls "The Great Recession" (and which I'd refer to as "Great Depression II"), Greenspan was interviewed by Jon Stewart on The Daily Show. In that interview, Greenspan simply and without further qualification stated that CENTRAL BANKING IS NOT A PART OF THE FREE MARKET. That is, the Maestro himself admitted on cable TV in front of a live audience that as Fed chief, he was not the lead chaperone of a free, unencumbered market but rather he was the chief architect of the manipulation and distortion of the economy via his antics at the Federal Reserve.
If you have read Rand extensively (and I doubt you have, or you wouldn't say such ignorant things as what you've said so far), you'd probably realize that Rand spent relatively little time in her writings talking about monetary affairs. She certainly was not a well-known business cycle theorist and at no point, as far as I am aware, did she ever cheerlead a central bank-induced boom, nor did she defend a central bank-attempted "reflation" in the aftermath/bust of such a boom.
She has written a bit here and there about inflation. Try some of these quotes, collected at the Ayn Rand Lexicon website (http://aynrandlexicon.com/lexicon/inflation.html) from her various writings, and see if you can spot the way in which she "influenced" Greenspan while at the Fed:
“Inflation” is defined in the dictionary as “undue expansion or increase of the currency of a country, esp. by the issuing of paper money not redeemable in specie” (Random House Dictionary). It is interesting to note that the word “inflated” is defined as “distended with air or gas; swollen.”
(Part II)
DeleteThis last is not a coincidence: in regard to social issues, “inflation” does not mean growth, enlargement or expansion, it means an “undue”—or improper or fraudulent—expansion. The expansion of a country’s currency (which, incidentally, cannot be perpetrated by private citizens, only by the government) consists in palming off, as values, a stream of paper backed by nothing but promises (or hot air) and getting actual values, the citizens’ goods or services, in return—until the country’s wealth is drained. A similar activity, in private performance, is the passing of checks on a non-existent bank account. But, in private performance, this is regarded as a crime—and most people understand why such an activity cannot last for long.
Today, people are beginning to understand that the government’s account is overdrawn, that a piece of paper is not the equivalent of a gold coin, or an automobile, or a loaf of bread—and that if you attempt to falsify monetary values, you do not achieve abundance, you merely debase the currency and go bankrupt.
Here's another:
Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.
And one more:
You have heard economists say that they are puzzled by the nature of today’s problem: they are unable to understand why inflation is accompanied by recession—which is contrary to their Keynesian doctrines; and they have coined a ridiculous name for it: “stagflation.” Their theories ignore the fact that money can function only so long as it represents actual goods—and that at a certain stage of inflating the money supply, the government begins to consume a nation’s investment capital, thus making production impossible.
Interestingly, pre-Fed Greenspan (before he went on to completely contradict himself by serving as the lead interventionist in the economy despite his history as a member of Ayn Rand's strongly anti-interventionist Collective) was also captured in a quote at the Ayn Rand lexicon. Is THIS the "overdose on Rand" that Munger was blabbering about?
The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government
(Part III)
Deletefor welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.
~Alan Greenspan, “Gold and Economic Freedom,”Capitalism: The Unknown Ideal, 101
The argument that Greenspan "overdosed on Rand" while at the Fed, and that this was the reason he not only created the boom but let it go on so long, was not even strong enough to be TENUOUS to begin with. At this point, I think that battle standard has been shorn to pieces and now lies in tatters on the ground.
But maybe you will make the mistake Munger abhors, which is to filter this evidence in such a selective way that it will allow your preconceived notions and "ideological assumptions" to remain in tact.
For the incredulous, Alan Greenspan's 2007 interview with Jon Stewart on The Daily Show: http://www.thedailyshow.com/watch/tue-september-18-2007/alan-greenspan (beginning at 4:00, Greenspan comments on the role of a central bank in a free market)
Greenspan: "To the extent that there is a central bank, governing the amount of money that is in the system, that is not a free market and most people would call that regulation."
Wait, Uncle Charlie, I thought Greenspan "overdosed on Ayn Rand" and was all about unregulated free markets, which he called a "mistake"? But here he is admitting a central bank is not part of the free market and is a form of regulation.
That does not compute.
During the 60's and 70's, at the same time he was close to (and likely influenced by) Ms. Rand, Greenspan was very much an advocate of the gold standard, and spoke out strongly against fiat currency.
DeleteIt was only years later, after Rand's death and after his appointment as Fed chairman, that Greenspan lost his way and departed from Rand's philosophical support for sound money and savings.
My guess is that during this time, he became a believer in the "brilliance" of the federal reserve's economists, and bought into the Keynesian notion that he could control the economy. If anything, Greenspan severed any link to Rand's philosophy at that point, and basically just drank the Kool-Aid.
I had to stop it when he said "The problem is people just want free money from the Government. They lack virtue." For serious old man? How much cash did Berkshire get from the 2008 bailouts? FROM THE GOVERNMENT. How are your GS investments doing - a bet you made with inside information? ABOUT THE GOVERNMENT If I'm uncivilized for buying gold, you sir, are a baboon.
ReplyDeleteTaylor rocks. Don't get on his bad side.
ReplyDeleteWenzel, you're wrong about Rand. You need to read her.
ReplyDeleteRand:
"Paper Money Is Mortgage on Wealth That Doesn't Exist
Whenever destroyers appear among men, they start by destroying gold money, for it is man's protection, and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold is an objective value, an equivalent of wealth produced. Paper money is mortgage on wealth that does not exist, backed by guns aimed at those who are expected to produce. Paper money is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: "account overdrawn".
When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and to become fodder for the immoral. Do not expect them to produce when production is punished and looting rewarded. Do not ask who is destroying the world. You are."
I think more than anything this proves that Rand was far from an economist. Gold is a subjective value not an objective one.
DeleteThe writing style is awesome, but she makes no points that an economist would make. It's great she is anti-paper money, but it is clear she doesn't understand the Regression Theorem or how evil paper money came about.
Wenzel,
ReplyDeleteMe again. Please don't join the rest of the ignoramuses out there criticizing Ayn Rand without reading her or understanding her.
Read the whole passage on money, which I pasted in the previous comment.
Now read this on inflation and time.
http://www.aynrand.org/site/PageServer?pagename=reg_ar_egalitarianism
Where do I criticize Rand? All I am saying is that she was a philosopher and a novelist, not an economist. Thus, it is absurd to link Rand in any way to what Greenspan did as Fed chairman.
ReplyDeleteI'm really defending Rand. My point is that Greenspan did not get his money printing ideas from Rand. She understood gold versus paper money in some philosophical way, but not the way an economist, of any stripe, would look at the matter.
If anything, Greenspan, being the god of the money printing press, even ignored Rand's philosophical views on money.
No criticism of you. Just reiterating that Ms. Rand knew quite well of what she spoke.
ReplyDeleteBy the way, I might be wrong but I think her use of the word "objective" (as you reference it) relates to her philosophical opposition to irrationality (rational being objective), not to the subjective valuation ascribed to things by Rothbardians. Identical terms, but different.
And thank you, Conant.
I can always count on good sense from you.
Point three. Rand considered Greenspan an opportunist. And he was. As soon as he went into government, he abandoned his pro-gold position and become an inflationista, and now, the paper money crowd blames that on her.
She's just an easy target because her life was unconventional.
You couldn't get away with slandering Von Mises or Rothbard - more conventional in their lifestyles - in the same way.
It's the way men pillory a strong female competitor as a "whore"...which is what seminarian (!) Jerry Brown did to Meg Whitman.
Most women shy away from attacking men in the same way, so they tend to get the worst of public debates, even when they're better than the competition.
Short tongue-in-cheek history of Greenspan's career
ReplyDeletehttp://www.lewrockwell.com/bonner/bonner336.html
(The reference to Rand as a dreary woman is by my coauthor. I'm a sincere, although not uncritical, fan).
No non-Austrian ever has the slightest familiarity with even basic Austrian School concepts. I used to think that this was rule of thumb but now I think it may actually be an axiom of the universe. Thus, Munger would have no idea whether Rand influenced Greenspan or vice verse or whether Greenspan's funny money adventure was influenced by Rand or not.
ReplyDeleteAnd it was preposterous to make such a suggestion.
Wenzel,
ReplyDeleteRand was against the existence of the central bank. That by itself shows that she can't be blamed for anything Greenspan did.
In "capitalism the unknown ideal" she sites "human action" on several occasions. Her reading human action makes her more of an economist than about 95% of current economists.
ReplyDelete