Thursday, August 12, 2010

The gentleman who taught me about Commodities Market ----Jim Rogers


JR=Jim Rogers Interview Transcript

Posted by Matt Hawes on 08/06/10 6:12 PM
Last updated 08/06/10 6:15 PM

[Newer: C4L Interviews Jim Rogers] [Older: Who poses the real threat to the Internet?]

C4L: We have the financial reform bill that recently passed through Congress. They're instituting a new Consumer Protection Bureau within the Federal Reserve, imposing more stringent regulation requirements on large financial firms, and creating a council to identify systemic risk. Will this sort of reform be effective in preventing future financial crises, and what do you think will be the effect on US businesses?
JR: Well, it's part of the trend where the US for whatever reason, both consciously and unconsciously, is driving the business out of the US. There's a transition now from the US to Asia in the financial world and the economic world. The largest creditor nations in the world are now in Asia: China, Korea, Taiwan, Hong Kong, Japan, Singapore, you know who the largest debtor nations in the world are.
In the 1920s and 1930s, there was a move from the UK to the US, exacerbated by a financial crisis and by many mistakes by UK politicians. Well, the same is happening now. People didn't notice what was happening in the 20s and 30s; apparently people don't' notice it now, but 10 years ago, most of the large IPOs in the world were done in New York; now very few of them are. America's driving the business out in many, many ways, and that's going to continue. I don't particularly like saying it; I don't particularly like seeing it happen. I'm an American. I pay taxes in America like you do, so it's not good, but it's making America's situation worse, not better.
C4L: What is that other countries are doing to be more financially prudent than America?
JR: They're leaving the market alone. In America, the government and the central bank especially, have interfered with the market several times. Under Alan Greenspan, whenever things got difficult for somebody, they called up Greenspan and said, "Save me, save me, save me!" And the government interfered with the market. Bernanke did the same thing. Rather than letting the market do what the market's supposed to do, i.e. which is let bankrupts go bankrupt, clean out the system, start over, Greenspan stepped in and said, "No, no, no, we don't want the market to work. We want to determine who wins, who loses, and what's going to happen in the world." He bailed out the market when long-term capital management came; he bailed out after the dot-com. Every time something happened he came in, interfered with the market, and would not let the market do its fundamental work, which is to sort itself out. Unfortunately, we are all now paying the price. Bernanke is of the same yolk, he's been doing the same sorts of things. So you and I, and, well, the world, not just every American taxpayer, the world is paying the price for all of this.
C4L: Well, if you were the President of the United States today, do you think that there are any practical steps that you could take immediately to fix the economy, and what would they be?
JR: Oh, sure. I would abolish the Federal Reserve. I would cut taxes. I would cut spending in a draconian manner. A very draconian manner. The idea that you can solve a problem of too much debt and too much consumption, with more debt and more consumption, defies comprehension. I can't believe that grown-ups would say words like that out-loud. But that's what they seem to think - I don't know if they really believe it's going to work, but they just don't know what else to do, and you know they're all doing... for the next elections, so they're making things worse. There are plenty of ways to solve the problem. You let the people who go bankrupt go bankrupt. You let Fannie Mae and Freddie Mac go bankrupt, go out of business. You let AIG go out of business. You stop bailing everybody out. The Japanese tried it our way in the early 90s; they refused to let anybody go bankrupt, and they still talk about the 1990s as "the lost decade." Now they're talking about this decade as the second lost decade. Japanese stock market today is 75% below where it was in 1990. That is not a typo. It is down 75% in 20 years. Can you imagine if the New York Stock Exchange, or if the DOW Jones to use a better example, were at 4000? I don't think people would be very happy. Well, that's the equivalent of the situation in Japan right now. It didn't work in Japan; it's not going to work in the US. It's going to lead to more problems. People say, "Oh, our poor grandchildren! Look at all this debt!" No, no, no, it's not our poor grandchildren; it's us! This is a current problem! This is a problem, even our parents, if they're still alive, forget our grandchildren; our parents are going to be suffering, and our grandparents if they're still alive! This is a current disaster for all of us.
C4L: When you say disaster, what exactly do you mean? What do you think is the realistic result of the current trajectory? Would hyperinflation, for example, be a possibility?
JR: Well, yes, hyperinflation is always a possibility. Anything is possible. I've learned that in my life. Studying philosophy when I was in University, I do know that anything is possible. I doubt you will have hyperinflation anytime soon, in the US anyway. Of course, we might; we might if they continue the current policies. Bernanke has said recently that he will take more measures. Well, Bernanke doesn't know much about finance, he doesn't know much about economics, or currencies, or markets. I mean it's staggering to go back and read his statements. You realize the man knows nothing about what he's doing. All he knows is printing money. He has studied printing money his entire intellectual career, and now we've given him the printing presses. Well, when he says he's going to do more, all he can really do is print money. The US, I don't think, can quadruple or quintuple its debt again anytime soon. I mean, if Bernanke will print money, then soon the world's going to run out of trees at the rate he's going. That's what he'll try; it's not going to work. Eventually it will lead to more inflation; we have inflation now. It will get worse, and eventually if things continue, it will lead to hyperinflation. But you know, hyperinflation is not that easy to do. Well, it's very easy to do if you go nuts, but it takes awhile for things to deteriorate into hyperinflation.
C4L: Given the current situation, what would be general advice that you would give Americans in order to protect their financial assets?
JR: Well, throughout history, when people have printed money, it's led to debasing of currencies. And the way to protect yourself and even to make money has always been that you'll use real assets. Whether that's silver, or natural gas, or cotton, or rice. You know, there are many natural resources or real assets that people have used throughout history. I would urge people to learn about real assets. I would urge people to learn about foreign investing; many countries are certainly doing much better than the US. I would urge people to learn about having investment accounts outside the US, because many currencies and economies will do better than the US going forward, and it's a good form of diversification and insurance if nothing else.
C4L: Last but not least, the US dollar has been the world's reserve currency for some time. Do you think that will be sustainable? And also, has there been any kind of "exorbitant privilege" in the fact that it has been the reserve currency? Has it had an effect on the economic landscape?
JR: The world has had many reserve currencies throughout history, and that always changes as reserve currencies or the nations behind reserve currencies get into trouble. The Pound Sterling gave way to the US dollar. The US dollar is already giving way. As you know, more countries are worried about the dollar. More countries are starting to use other things to settle their debts. This is a process which is underway and will continue, there's no question. The US dollar is a terribly flawed currency. The US is not just the larger debtor nation in the world, it's the largest debtor nation in the history of the world. So, naturally, many people are starting to figure out, "well, what do we do?" I hope including you, and including all of your listeners, and all of your readers, because this is history. This is the way the world works, and it's working this way again, fortunately or unfortunately depending on how you look at it. As the Pound Sterling lost its prowess 60 or 70 years ago, some people made fortunes on the change; some people lost fortunes. The people who understood what was happening made fortunes; the people who didn't lost fortunes. I hope people figure this all out and take appropriate actions.
C4L: OK. Well, Jim, that's all the questions we have, so we really appreciate you taking some time out to talk to us.
JR: Thank you. Anytime. Great pleasure.
Note: Nothing expressed in this transcript should be considered as investment strategy or advice from SHAN SAEED.

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