Cryptocurrency- Charlie Munger defended the Fed, saying it needs to curb inflation even if the cost is a recession.
- Warren Buffett's right-hand man compared the US central bank to the sober person at a party.
Charlie Munger supports the Federal Reserve's efforts to crush inflation, even if they drag the US economy into a mild recession.
"I think the Fed is willing to have a little recession in order not to have out-of-control inflation," Warren Buffett's business partner and Berkshire Hathaway's vice chairman told CNBC on Tuesday.
"That's what they're supposed to do," Munger continued. "They're supposed to be the one guy at the party that doesn't hang around the punch bowl getting drunk."
Yearly inflation soared to a 40-year high of 9.1% in June and dipped to 7.7% in October. The Fed has responded by hiking interest rates to cool the economy and relieve upward pressure on prices. It has lifted its benchmark rate from nearly zero at the start of the year to a range of 3.75% to 4% today, and signaled it could peak above 5%.
Munger also noted the Bank of Japan has maintained a policy of ultra-low rates for years.
"If you look at Japan today, you would find that the central bank has made our central bank look like a little mouse that hardly tries to do anything," he said.
The 98-year old investor said he largely approves of the Fed, and argued it saved the economy by cutting rates and boosting bond purchases when the pandemic struck in 2020.
"We were in enough trouble when this thing started, that if the Fed hadn't done what it did — which was very aggressive — we would have had one hell of a mess, which would have been way worse than what we have now," he said.
Munger also bemoaned the wild hype and reckless speculation that drove up the prices of stocks, cryptocurrencies, housing, and other assets during the pandemic, contributing to red-hot inflation this year.
"Of course in every crazy boom there is crazy excess," he said. "I don't like wretched excess and manias and so forth, and we have a lot of that."
On a related note, the 98-year-old investor called out rampant fraud and delusion in the crypto industry, days after Sam Bankman-Fried's FTX exchange collapsed into bankruptcy. He also drew a line between Tesla and bitcoin, saying Elon Musk's automaker has made "real contributions to civilization."