Berkshire's Munger says over-politicization makes inequality a problem

Source: Xinhua| 2019-05-07 09:48:02|Editor: Li Xia
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WASHINGTON, May 6 (Xinhua) -- Berkshire Hathaway Vice Chairman Charlie Munger has said the problem of inequality in the United States today is the result of over-politicization, and otherwise it will cease to exist.

"It's a problem when politicians are screaming about it. That makes it a problem," Munger told Yahoo Finance editor-in-chief Andy Serwer in his first interview after Berkshire held its annual shareholders meeting Saturday.

"If it weren't for that, this one would go away by itself," he added.

Regarding the inequality as an "accidental byproduct" of the U.S. aggressive monetary policy aimed at achieving economic recovery from the 2008 financial crisis, Munger pointed in particular to the Federal Reserve buying trillions of U.S. dollars of bonds during the period.

"It was risky, but it worked," Munger said. "We never printed money so much and spent it so fast and bought back so much debt, public and private. So this is total terra incognita in economics, and nobody knew for sure how it was going to work."

The Fed said in a statement in March that it intends to conclude the reduction of its aggregate securities holdings at the end of September. The process, known as Balance Sheet Normalization, started in October 2017.

The Fed's asset portfolio, as a consequence of the quantitative easing policy following the financial crisis, amounted to about 4.5 trillion dollars when the U.S. central bank began to gradually reduce it two years ago.

Munger said the Fed's loose monetary policy "turned out to be a very wise response" at the time of the financial crisis. "And what's even more remarkable is that both Congress and the presidency under both parties made the same decision -- they all cooperated, it was the last time."

Speaking of the degree to which President Donald Trump contributed to the currently better U.S. economic situation, Munger said he "deserves some credit," but a lot of what happened is attributable to the economic cycle and "the decisions of his predecessors."

As regards Trump's request that the Fed should lower the interest rates and adopt quantitative easing, Munger said "it's not a good idea."

"Presidents have always done this," he said. "If you are a politician in a democracy, of course you want people to print money and spend it, and of course it's not a good idea."

Trump last week called on the Fed to lower interest rates and adopt quantitative easing, citing an economy he said is "doing well."

Munger said there will come a point when printing money is counterproductive. "I don't think we are at that point, but nobody knew when the point was going to come."