'Civilized People Don't Buy Gold': Berkshire's Munger

Charles Munger, 88, on CNBC (May 4, 2012): "Gold is a great thing to sew into your garments if you’re a Jewish family in Vienna in 1939," the Berkshire vice chairman said, "but I think civilized people don’t buy gold, they invest in productive businesses."

Charles Munger (Feb. 2011): “I don’t have the slightest interest in gold. If you’re capable of understanding the world, you have a moral obligation to become rational. And I don’t see how you become rational hoarding gold. Even if it works, you’re a jerk.”

Warren Buffett (Feb. 2012): What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while.

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Berkshire Hathaway made a killing in the earlier part of its history in the '80s and '90s and also handily beat the S&P 500 in the last 5- and 10-year periods. But if you think the only thing that's worth comparing to is the S&P 500, think again.

Don't look now, but here's a comparison of Berkshire Hathaway vs. Commodities in the past 5- and 10-year period:

Makes one wonder why Buffet and Munger would attack something the world has considered a currency for thousands of years especially in the backdrop of today's world of paper (fiat) currencies that are backed by "promises" and "full faith and credit" of sovereign governments.

Also, let's not forget the fact that central banks around the world are simultaneously printing money at speeds and levels never seen in the history of the world. Afraid, damn right I'm afraid:

Here's a reminder of how the purchasing power of our precious US Dollar has fared since going off that thing called the Gold Standard (where money was backed by something of value):

See that red line? That's what happens when you can print as many dollars as you want to fund wars, entitlement spending, bridges to nowhere, and housing bubbles. What's backing that paper in your wallet called US dollars? The full faith and credit of the United States government. Let's hope that our lenders continue to believe that the US will be able to pay back the >$10 trillion in external debt as well as interest payments (assuming the US doesn't issue more debt, haha, that was a joke).

Here's gold's purchasing power since 1971:

I bet central banks could figure out a way to print gold too.

Source: http://www.cnbc.com/id/47298734
Source: http://www.jimslater.org.uk/wp-content/uploads/Gold-vs-Berkshire-Hathaway.pdf
Source: http://www.forbes.com/sites/timworstall/2012/02/10/why-warren-buffett-doesnt-invest-in-gold/
Source: http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/