Civilized People and Totalitarian Praises.

Charlie Munger started out with a doozy in his CNBC interview with Becky Quick.

Gold is a great thing to sew onto your garments if you’re a Jewish family in Vienna in 1939 but civilized people don’t buy gold – they invest in productive businesses.

He then follows that up by saying about China:

Considering where they started, in a communist bureacracy, with widespread starvation, and without any big wars or anything, to have transformed a nation that big, by a combination of population control and bringing in free market business principles, its one of the most remarkable human achievements in the history of the world. And I can’t help admiring some of the people who caused it.

Are we to believe Charlie Munger?  What is the basis for this argument?

Put another way, he is saying that one of the most remarkable human achievements in the history of the world is was created by a centrally planned, totalitarian government of a few, ruling over a billion, through the mercantilist export driven economy, requiring fiat currency.

The reality is the opposite.

China has an economy that subsidizes the American consumer at the expense of the Chinese citizen, with a currency that is pegged to the dollar.  While its people work in factories building our iPhones, the quality of life is so poor that they are killing themselves. They do not see a better life for themselves, because they do not retain the wealth from their labor.  The communist party does.

The People’s Bank of China (PBoC) is the third largest owner of US Treasury debt, which subsidizes the ability of our government to borrow and spend on welfare and warfare at an artificially low interest rate, and therefore artificially low cost.  Where does the PBoC get the money to buy this debt? The companies (like Foxconn) are paid in dollars and sell them to the PBoC in exchange for the Chinese Yuan. The Bank keeps the dollars, but then prints Yuan 6.65 per dollar, in exchange.  The Bank then buys Treasury debt with the dollars.  This is inflationary.  The money supply of Yuan increases.  This causes all sorts of problems in the China mainland, because there are now more Yuan chasing the same products.  Prices go up. For everything.  Like real estate.

In 2009, Hugh Hendry made a video showing the empty sky scrapers in the CBD, the Central Business Distict of Beijing.

Australian TV did a special on China’s ghost cities and malls.

And Charlie Munger praises population control?  The Chinese use forced abortions to enforce the one-child policy. This results in infanticide with a widespread preference for boys over girls.  This led to an explosion in the boys to girls ratio in the 1980s and 1990s.  It was a demographic time bomb. In 1978 there were 102 boys for 100 girls.  In 1998, 112 boys for 100 girls. Today, 120 boys for 100 girls. This means 37 million more men than women.  There are not enough females for the males to marry. There are not enough children to support the elderly in their old age.

Then, there is the blind self-taught legal advocate of human rights, named Chen Guangcheng.  He opposes the one-chile policy. And for his opposition through free speech, he was imprisoned for 4 years for exposing abuses in official family-planning policy, often involving claims of violence and forced abortions.  He was put on house arrest, and the government beat Chen and his wife, confiscating documents and communication devices, cutting off electric power, and installing metal sheets over the windows of their house.  His supporters were pummeled, beaten and robbed by security guards who kept him on house arrest.

But he escaped.  And it became an international incident because the USA protected him in the embassy. And now we are asking China to allow him to “study abroad”. A nice way for The Party to save face.

Charlie, there’s an alternative for this distinction of great soceital human achievements.  It is the story of America and the creation of representative democracy built on the principles of life, liberty and property.  All of which are violated by the Chinese Communist Party.

Civilized people do buy gold as a protection from their evil rulers.  The rulers who steal wealth from their people by creating inflation and then telling them that inflation is good for the economy.  That inflation is what will create economic prosperity.  That our Dear Leaders can spend our way to success through Keynesian stimulus programs.

Civilized people respect the human rights of others, and they do not kill infants if they are girls.  Because it is fewer mouths to feed. The supression of the people at the dictate of the Party.

The masses do not buy gold, because they are told not to by people like Charlie.  They trust.  They are fools to do so.

George Bernard Shaw said, “You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.”

A centrally planned economy cannot succeed in the long run. Like the Soviet Union and its suicide on December 25, 1991, when Gorbachev resigned as president of the USSR, declaring the office extinct.  A Christmas Present to the People. That day marked the real transfer of the “power to the people”.

As Thomas Jefferson might say to Charlie Munger, “Timid men prefer the calm of despotism to the tempestuous sea of liberty.”


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