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Monday, March 1, 2010

America - on the road to ruin? Charlie Munger of Berkshire-Hathaway thinks it is!

Berkshire Hathaway 2009Image by TEDizen via Flickr

Is America on a road to ruin? Financially? Politically? Is the "great experiment" coming to an end? Could it's decline have been predicted by studying the rise and fall of all great empires? Charlie Munger seems to think so. One of the scions of the most successful investment company in history, Berkshire-Hathaway is saying exactly that in a recent article at Slate.com.

Charlie lays out an interesting, and I might add, a very compelling argument for the demise of the American Empire, beginning as early as 2012. In contrast to his business partner, the venerable "Oracle of Omaha", Warren Buffett, an eternal optimist, Munger maintains that it is "blind optimism" that will be America's final undoing.

As the "Casino gambling" mentality of Wall Street investment banks takes hold more and more in American society, and average investors and governments are persuaded to "let it ride" instead of reining in the massive bets on paper investments like credit default swaps and other murky derivatives, that "blind optimism" will be our undoing, according to Munger. The U.S. government is divided as never before. The right wing will do "whatever it takes" to undo the Obama Presidency as is evidenced by the upshot "Tea Party" the party of "no"! Republicans don't seem to be interested in coming to agreement on anything proposed by this administration, preferring to "just say no" instead of offering alternatives and meeting in the middle to obtain resolution, whether it is the financial crisis, health care, energy or almost any decision of significance. The democrats are no better, preferring to argue within their own caucus and dither on passing any legislation that moves even a little bit, away from their individual pet position of the day.

Munger maintains that, among other developments, this dithering and procrastination will allow the casino mentality to continue in financial circles, as the army of Wall Street lobbyists continues it's onslaught in Washington to convince Government of the status quo, restrict any and all new regulations, and just "let-it-ride!

As they say in Omaha, Mrs. Munger didn't raise no fool! Buffets optimism aside, Mungers argument should not be dismissed out of hand. It is worth reading and considering, especially as you lay out your investment horizon in the coming years.

Some excerpts from the blunt Mr. Munger on Investment Banks:

“This is an enormously influential group of people, and 90% of that influence is being spent to gain powers and practices that the world would be better off without,It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”

"We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been -- and as stupid as they’ve been.”

This writer, and many others, have been warning you about some of the problems for years. but now you can hear it from one of the most prolific investors of all time, Charlie Munger!

Charlie Munger: Basically, it's all over!

PS: Just to clarify, I don't agree with Charlie. History has taught us that America can never be counted out. It will rebound. It's just a matter when.

Related Articles:

Capitalism, Greed and the Faustian bargain of more liquidity!

An argument for Gold

Vultures of Wall Street

Pigs at the Trough

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