Charlie Mungers Dire Warning About Deflation

In the tumultuous economic landscape of the past three years, a series of jaw-dropping developments have left both experts and the public stunned. One of the most glaring phenomena has been the surge in inflation, catapulting the costs of goods across America at an unprecedented pace in the aftermath of the tumultuous events of 2020. From essential commodities like food and gas to more significant investments like lumber, houses, and stocks, prices soared to levels not witnessed since the economically turbulent 1970s. Inflation, an unrelenting force, seemed to barrel through the economy with unyielding momentum, leaving many wondering if there was an end in sight.
Fast forward to the unexpected turn of events in 2023, and the economic narrative has undergone a seismic shift practically overnight.

[rossderer]

I'd prefer deflation over perpetual inflation. I don't trust Central planners. Deflation seem like the wild card scenario and that sounds better than the status quo.

[avenger]

I'll take my chances with deflation thanks. At least with deflation I have a chance. If inflation trends continue, I'm guaranteed screwed. Deflation may hurt for a time if it causes unemployment, but it resets the economy in a way that works for more people than just the wealthy. This is how the economy works. It overheats and has to correct. If it doesn't correct, the problem compounds as new debt is created to prop up bad investments and bad debt, while diluting the purchasing power of the working class who rely on the value of currency over the value of assets. You can't correct an economy full of bad debt and bad businesses without causing some pain. Otherwise, get used to higher prices and lower purchasing power for the rest of your lives, with more and more asset bubbles and wealth inequality.

I've never heard a good argument against deflation. I don't expect I ever will.

[marknorth]

I work in China, everything being manufactured is down by 20-50% this year. Reduced demand and overcapacity is pushing prices down at record levels. I believe this will flow through the rest of the world in 2024

[Larimerst]

I would venture to guess that fully 80% of Americans are hoping for widespread deflation. Deflation in asset prices would be the single most effective way to reduce corrosive wealth inequality in our society and deflation in consumer goods and staples would provide much needed instant relief for desperately struggling households.

[ab_ab_c]

Dude, they jacked up prices relentlessly since mid 2021 & wages have NOT kept up for many people. Tightening monetary police has consequences, such as deflation.

Let them sweat & drop their prices to draw consumers in where they see good deals.
It's all the supply & demand game.. Let it be what it is & stop hyping it.

[rrahh]

We need about 160 years' worth of deflation. In 1867, the dollar was the highest it would ever be worth. When pegged to gold and exchange rated, one ounce of gold was worth 67 cents. That's right, the dollar was MORE valuable than gold. The nation was extremely wealthy and one dollar could buy you a lot.

[DrDisinfect_TheWorld]

I see why "economics" isn't taught early. The government wants debt

[BDUBB]

Existing home market in my area is stagnant, it’s caught between sellers refusing to accept that they can no longer double the price they paid less than 4 years ago, and new homes that can incentivize so much more, that the disparity between new and existing isn’t even close. However on both accounts, the pace of sales is sluggish at best. If inventory keeps increasing, as it is currently(and unusually so given time of year) the prices will come down. With rents declining, I suspect that by early next year, a significant amount of homes(relative to total homes on market) that can’t rent and don’t pencil out for investment anymore will be hitting the market, and with it, more significant price cuts.

[mattolivier]

Little Charlie Munger made his money through Keynesian economics so of course he doesn't like deflation. Austrian economics is FAR superior. At least if you believe in fairness and equality of opportunity. Mungar is a statist.

[DrDisinfect_TheWorld]

I love deflationary times. Sucks for businesses but not for me.

[wayward]

What about the inflation loop. We just saw that in housing, FOMO raised prices 40% in 2 years.

[kim.in.nature.]

Charlie had quite a ride in his lifetime!

[WhittyPics]

Housing went up too high and too fast. Prices need to retreat back to 2019 levels

[mattolivier]

Warning? Deflation is a GOOD thing! I'm patiently waiting to invest in RE and stocks. I'm waiting for them both to drop by 40% so I can become rich. It's a no brainer. If deflation is a problem, it's ONLY because of the economic system that the gov't implemented. Thank your gov't and STOP blaming deflation. Keynesian economics is NOT a good thing.

[scotthookey]

It's not a surprise. The prices rose so much and so fast that without deflation, the bottom socioeconomic rungs cannot survive. We need deflation...

[TAA]

Funny because when prices go down I tend to buy more. The inverse thing is happening right now. There is stuff I’d like to buy but I am not willing to pay the ridiculous amounts they are asking. So I don’t buy them.

[Corndogg]

Deflation has Never caused the collapse of an economy. Many many times Inflation Has caused a civilization to collapse. Look at the inflation in the Roman Empire that preceded the fall. Japan is doing alright, we got out of the Great Depression. Not a great analysis here brother. Deflation far preferable to perpetuated inflation

[tonysilke]

Interesting how over 2% inflation has been a concern when central banks and the Fed begin to hike interest rates. I consider the rising interest rate to be a very serious issue since it will undoubtedly cause more investors to withdraw their money from the stock market. But then I'm still aware of certain investors that continue to earn over $365, 000. Wish I could accomplish that.

[flight]

I didn't hear Charlie say he believed we were headed into a dire deflationary period. He just said we're not immune to it.

[james-khoi]

The people in Japan, save more money, than the people in the US. ...responsibility.