Is the Value of the American Dollar Going to Drop to Zero?

I have two words for you. Land and ammo.

There’s a song called “Land and Ammo” that has the following hook in it:

“The Federal Reserve is out for its own

Eyes gone blind, can’t see where it's gone

Charlie Munger says fiat to zero

Land and Ammo

Land and Ammo

Land and Ammo”

Now, it’s a good song, but the first question you may have after hearing that, especially if you’re not familiar with the world of investing, is “Who is Charlie Munger and why does he think the fiat is going to zero?”

For those who aren’t familiar with him, Charlie Munger is a 98-year-old billionaire who’s famous for being the Robin to Warren Buffet’s Batman at Berkshire Hathaway. Of course, Munger has also written multiple books and has made a name for himself as a very savvy investor. Personally, I consider him to be an extremely sharp guy on everything related to money except cryptocurrency, which didn’t even come into being until he was 84 years of age and is totally incompatible with his style of investing.

In an interview earlier this year, Munger talked about inflation and the American dollar. Suffice it to say that his long-term view is extraordinarily pessimistic:

ANDY SERWER: I mentioned inflation, Charlie. And the stock market is down a bit this year, maybe because of inflation-- also the tensions in Russia and Ukraine, maybe we'll get to that in a second. But I want to ask you specifically about inflation. Are we looking at a prolonged decline in the markets because of inflation? Is inflation on the rise? And should we be concerned about it?

CHARLIE MUNGER: Well, let me take that in the reverse order. Inflation is a very serious subject. You can argue it's the way democracies die. When democracy dies in Latin America, inflation is a big part of it. So it's a huge danger.

Once you've got a populace that learns it can vote itself money, if you overdo it too much, you ruin your civilization a lot. And so, of course, it's a big long-range danger. If you look at the Roman Republic, even after they went to an empire with an absolute ruler, they inflated the currency steadily for hundreds of years and eventually the whole damn Roman Empire collapsed. So it's the biggest long-range danger we have probably, apart from nuclear war.

ANDY SERWER: Is it something investors need to be worried about, specifically when it comes to growth stocks right now?

CHARLIE MUNGER: Well, I think the safe consumption for an investor is that over the next 100 years, the currency is going to 0. That's my working hypothesis.

ANDY SERWER: Wow, well, that will be a different type of environment, won't it?

CHARLIE MUNGER: It's a very dangerous environment.

ANDY SERWER: And what about the fact--

CHARLIE MUNGER: What brought in Hitler was the combination-- what brought in Hitler was the combination of the Weimer inflation where they utterly destroyed the savings of the middle class in Germany, followed by the Great Depression. It was the one-two punch. And Hitler came in, crazy demagogue, with 40% of the votes, and pretty soon we had a dictator hell-bent for World War.

So the history is not pleasant. And Germany was a very advanced and civilized nation, the Germany that Hitler took over. I always say that the interesting thing about that was little Albert Einstein, a little Jewish boy, got his entire primary education with the insistence of the Catholic Church in Germany. Now, that is a very civilized nation.

So if you let your nation deteriorate too much, what you get is a Hitler. We proved it.

There’s good news and bad news here. Which do you want to hear first? Let’s start with the bad news.