The creation of an artificial currency, such as Bitcoin, has the potential to destroy civilisation as we know it and undo all of the progress humans have made.
This is the opinion of the late American businessman, investor, and philanthropist, Charlie Munger, who passed away on 28 November 2023.
He was Warren Buffett’s long-time business partner, who, before his death, shared his thoughts on cryptocurrency in an interview with the Wall Street Journal.
Munger was a well-known critic of cryptocurrencies, calling it “worthless”, “crazy stupid gambling”, and “massively stupid”, among other more profane remarks.
“Of course it concerns me,” Munger replied when asked if the recent Bitcoin price increases worried him.
Munger said the concept behind artificial currencies more generally contradicts some of his fundamental ideas and that “every educated person ought to have”.
“Those ideas include what Adam Smith taught everybody. You have a huge increase in what I would call civilisation per capita, and it happened just because people take better care of their own property than somebody else’s,” Munger explained.
“To get Smithian results, you need a currency to facilitate exchange. And to make the currency respected widely, the trick we have used is the sovereign issues it.”
Having a currency as a medium of exchange was vital for humans to develop and create complex economic systems that generate value for billions of people.
“The only way to get from hunter-gathering to civilisation that we know of that’s ever worked is to have a strong currency,” he explained.
“It can be seashells, it can be corn kernels. It can be a lot of things. It can be gold coins. It can be promises in banking systems like we have in the United States.”
“When you start creating an artificial currency, you’re throwing your stink ball into a recipe that has been around for a long time and that has worked very well for a lot of people.”
Munger also made his views about Bitcoin and other cryptocurrencies well-known during the Daily Journal Corp’s annual shareholder meeting earlier this year.
“I think the people that oppose my position are idiots”, Munger said when asked if he considered the other side of the crypto debate.
Advocates of crypto point to greater privacy, security, transaction speeds, and reduced cost as benefits of cryptocurrency.
In the past, Munger has responded to such arguments by calling crypto a “currency that’s good for kidnappers” and saying it is “rat poison squared”.
Munger praised the Chinese leader, Xi Jinping, for his foresight in banning crypto in September 2021, adding that crypto “makes us [America] look foolish” and that he is “ashamed of my country for allowing this”.
In a Wall Street Journal op-ed in February, Munger articulated his position on crypto more eloquently.
For Munger, crypto is an example of “wretched excess” due to gaps in regulation, and the underlying technology, blockchain, is a good idea that has been “carried to excess”.
Central to his argument is that crypto is not a productive asset. It is merely a “gambling contract with a nearly 100% edge for the house”.
Further, crypto undermines the Federal Reserve system and national currencies, which, according to Munger, have “turned man from a successful ape into a modern human”.
Replacing such a system, for Munger, is like replacing air. According to Munger, the driving force behind crypto is a combination of fraud and delusion.
Fraud because the ‘house always wins’ and delusion as it is predicated on greater fool theory – the idea that someone else will come along and pay more for it than you did.