Dear Mr. Munger,
Gold investors the world over, from central bankers to piggy bankers, kindly await your apology.
For the record, I refer to the following excerpt from your recent speech delivered at the University of Michigan:
I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.
Let's work our way backward through your statement, starting with your vilification of the character of individuals based upon their investment decisions. I happen to be a nice guy if you'd take a moment to know me, but your statement suggests you would have no interest in looking beyond the shares of gold and silver bullion proxy Central Fund of Canada (AMEX: CEF) that I hold steadfastly in my investment portfolio.
Of course, your boss at Berkshire Hathaway (NYSE: BRK-B) (NYSE: BRK-A) once owned 37% of the world's above-ground silver supply. By extension, would you have called Warren Buffett a "jerk" for hoarding silver even though it worked?
The foundations for common understanding
Given the degree of overlap in our macroeconomic perspectives, the capacity for mutual understanding may well have existed. I was duly impressed by the parable that you published at Slate.com back in February, wherein you blasted the continued proliferation of financial derivatives as the "casino gambling" that threatens to doom the United States to a sorrowful financial future. I have similarly viewed the massive global derivatives market as both a primary proximate cause of the global financial crisis and the single greatest threat looming over the global financial system (and in particular the United States and its currency).
As a matter of fact -- and you may well appreciate the irony here -- I used your parable as a direct springboard from which to discuss gold as a safe haven, and the investments by China's sovereign wealth fund into miners Freeport-McMoRan Copper & Gold (NYSE: FCX) and Gold Fields (NYSE: GFI). I employed your scathing account as a means to reiterate dollar-defensive stock recommendations like diversified materials supplier BHP Billiton (NYSE: BHP), and my top stock pick for 2010: Silver Wheaton (NYSE: SLW).
Regarding rationality and moral imperatives
I am particularly mystified by your attempt to relate the decision by investors to save capital in gold, rather than in rapidly depreciating U.S. dollars, to your moral imperative to understand what does or does not work in human systems. Could not this entire post-Bretton Woods experiment with unbacked fiat currency prove the ultimate example of what does not work in human systems?
In fact, if you wish to engage in a rational discussion of what does or does not work in human systems, there is a range of relevant topics that we could explore. For example:
- What can we infer from the historical record regarding the likely consequences of quantitative easing and deliberate monetary debasement?
- Is persistent, expanding, and unfunded deficit spending something that can be shown to "work" in human systems over the long term?
- Whose idea was it to begin referring to U.S. citizens solely as consumers, and is boundless expansion of consumption something that works in human systems?
- Why is saving called hoarding when it's done in gold?
If you have no interest whatsoever in gold, I am not here to attempt to change your opinion. What I do seek is your recognition for the people who bear the ultimate burden of the persistent currency devaluation and reckless fiscal policies that carry sustainable recovery further from our grasp. They include many millions of struggling individuals with nary a minute fraction of your financial resources, and those which see gold as a means of protection from further losses deserve far better than to become the subject of your misplaced ire.
Sincerely,
Christopher Barker
