When Charlie Munger speaks, Americans ought to listen closely.
Munger is Warren Buffett’s partner and one of the smartest minds on the planet.
Unfortunately, he’s also quite down on America’s chances of survival.
In a recent interview with Yahoo Finance, Munger warned, "Inflation is a very serious subject, you could argue it is the way democracies die."
All Americans are feeling the crushing effects of inflation in 2022.
Public opinion polling shows it is the most urgent issue facing the country.
But if Munger is right, that’s a bruise compared to the gaping wound that’s coming.
Driving his point home, Munger explained how America’s current inflation crisis may lead down the same path to collapse as the Roman Empire in the third century — a chilling comparison to America’s current inflation crisis when you examine the historical record.
The Pax Romana was a 200-year golden age at the height of Rome’s power.
The period began in 27 BCE under Augustus, and the Empire extended from Britain to modern-day Iraq. Romans made major advances in engineering, architecture, and the arts.
Trade thrived along the extensive system of roads built throughout the empire.
Rome’s citizens were secure as the government-maintained law, order, and stability.
However, the conditions that caused Rome’s demise bear a striking similarity to the financial situation staring the United States right in the face.
The death of Marcus Aurelius in 180 CE marked the end of the Golden Era of the Roman Empire. Between 165 and 180 CE, around 5 million people died from what scholars now believe was smallpox.
The plague wreaked havoc on supply chains, shrunk the labor pool, and created a tight labor market. This sparked inflation,which the Empire responded by devaluing its currency.
Their actions unleashed further inflation. Is this starting to sound familiar?
In the tumultuous century that followed, a string of emperors continued to debase the currency, at one point driving inflation to an astronomical 15,000%.
Emperors like Diocletian in 301 CE tried to fix the failing economy by increasing taxes and enacting price controls - but to no avail.
Once the government could no longer fund the powerful military that had long protected Rome’s prosperity, Germanic tribes invaded, and the empire collapsed.
It's sobering to see America following the same disastrous path.
Last year the American Rescue Plan, a $1.9 trillion stimulus package was signed into law. The Plan was designed to speed up the economy from the effects of COVID-19, which was already in recovery.
By stimulating the economy with trillions of dollars, while we were dealing with a disrupted supply chain, the conditions for inflation to thrive were in place.
We are now paying the price for inept fiscal policy. Inflation is currently at a 40 year high, energy and food prices continue to rise, and the labor market remains tight.
In the coming mid-term election, we need to have leaders that understand fiscal policy.
And don’t think it is business as usual to have a U.S. federal debt exceeding our gross domestic product by 25%.
If not, the price we pay won’t be just at the gas pump or supermarket. It might very well cost us our democracy.
Charles Mizrahi is author of Wall Street Profits for Main Street Investors and host of The Charles Mizrahi Show. Read His Reports — Here.
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