Berkshire's Munger: High-Frequency Trading 'Basically Evil'

Events in Europe are a great example of bankers gone wild and you simply can't trust them, said Warren Buffett's right-hand man Charlie Munger.

"What Cyprus demonstrates is an old truth: You can't trust bankers to govern themselves," Munger told CNBC. "A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it."

Seeing parallels between Cyprus and Iceland, Munger called it "stark, raving mad" and added that "the bankers would have been doing even more if it hadn't blown up. I do not think you can trust bankers to control themselves. They are like heroin addicts."

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Munger was also extremely critical of high-frequency trading.

"I think the long term investor is not too much affected by things like the flash crash. That said, I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else," Munger said.

"It's legalized front-running. I think it is basically evil and I don't think it should have ever been allowed to reach the size that it did," he said. "Why should all of us pay a little group of people to engage in legalized front-running of our orders?"

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Munger also said China is better than the U.S. at nipping crazy booms in the bud. "They're willing to step in and intervene. They're willing to take the punch bowl away right in the middle of the party," he said. "I like people like that."

Asked how what Fed chairman Ben Bernanke is doing to reflate asset prices differs from what Greenspan did, Munger told CNBC that Bernanke's policies are an antidote to crisis. "To some extent Greenspan did it to make the boom a little bigger," he said.

But Munger said it was to Greenspan's credit that he recognizes that maybe he was wrong "with his kind of extreme free market" approach. "'Let it run baby, let it run,' I think that was wrong," Munger said.

He also weighed in on the boom and bust in the housing market.

"Partly there was a time you felt foolish you didn't buy a house because you weren't making all the money everyone else was making, so it was a typical crazy boom," he said. "Now people have learned house prices can go down as well as up."

He continued, "It's like a fella who goes rabbit hunting and thoroughly enjoys himself. And then the rabbits haul out guns and start firing back. It would dim your enthusiasm for rabbit hunting and that's what happened in the housing market."

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul