Berkshire Weekend: Buffett, Munger on Inflation and Government Bonds
Liz Claman of Fox Business Channel quotes or paraphrases the Berkshire chairman and vice chairman:
Question: I’m 11 years old. How will inflation affect my generation? How is Berkshire investing to prepare for this time?
Buffett: It’s certain we’ll have inflation over time. We are following policies in this country now to stimulate business - which are bound to have some inflationary consequences. We’re building up a lot of external debt. Politicians talk about taxpayers paying for this and that - but we haven’t raised taxes. We’re actually taking less from taxpayers. People who are really paying are people buying fixed dollar investments from the government. So it’s probably the Chinese that are paying the most in terms of the loss of purchasing power they’ll have with government bonds. It sounds better to say the taxpayer than the Chinese are paying for it. The ultimate price of much of this will be the shrinking of value of fixed dollar investments down the road.
The best protection against inflation is your own earning power. If you’re the best at what you do you will command a given part of others goods and services no matter what the earning power. You will get your share of the national economic pie regardless of the value of the currency as measured in an earlier standard.
Second-best protection is a wonderful business.
Munger: The young man should become a brain surgeon and invest in Coca-Cola instead of government bonds.