Photo: Matt Koppenhoffer, The Motley Fool.

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway (BRK.A -0.16%) (BRK.B -0.44%), but it's not the only topic they discuss. This year, Buffett and Munger discussed inflation in response to a question from Carol Loomis of Fortune magazine.

Following are my notes on Loomis' question, along with the responses.

Carol Loomis: On a more cheerful subject: inflation. In your 1981 shareholder letter, you discussed ROE, inflation, and that Berkshire was not immune. Today, it seems like every central banker is desperate to create inflation. Should investors and business owners be thinking about inflation? How would it affect Berkshire?

Buffett: Only compared to Charlie could inflation be cheerful. Inflation would hurt us, but it would hurt most businesses. Certain assets that are highly leveraged would benefit from inflation. Let's assume that all over the U.S., $1 million was given to every household. Would the U.S. be better off? One thing I can guarantee, Berkshire would be worse off. What I describe would be wildly inflationary. The trick is realizing you've got a million dollars before everybody else. You don't create wealth by inflation. You can move it around, but you don't create it. Berkshire's earnings per share would go up, our intrinsic value in dollars would go up, but the value of the business in real terms would go down. But, if you own a home and inflation wipes out the mortgage, you'd be better off.

Munger: We had a test of hyperinflation in Weimar Germany. The people that owned stocks like companies like Berkshire, they got through. And everyone else got wiped out. Of course, if you create so much misery that you get hit by war and Holocaust and so forth, it's not a good idea to let it go that far. I don't like this huge confidence of people creating a whole lot of money and spending it. I don't forget Weimar Germany, and I don't think the U.S. should, either. I don't think we should risk blowing up the whole thing because of some crazy politicians. And in Weimar Germany they gave you back the mortgage at the end.

Buffett: Well, that's very interesting. He's way ahead of me, folks!