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Chris Martenson Interview With Jim Rogers: Why Inflation Is Raging Worldwide And He's Shorting US Treasury Bonds
"I see more inflation and more currency turmoil as we go forward. There are huge debt imbalances in the world. U.S. is the largest debtor nation in the world and all the assets are in Asia. The largest creditors in the world are China, Korea, Japan, Taiwan, Hong Kong, Singapore – this is where the assets are and the debts are in the West. Those imbalances have to be resolved. They frequently lead to more currency turmoil. We’ll see more inflation, we’ll see more governments fall. We just saw Tunisia fall – more are coming because the world is going to continue to have these problems, and especially inflation that is going to cause more social unrest."
So said investing legend Jim Rogers when he spoke recently with ChrisMartenson.com about the inflationary pressures rising dramatically around the globe, despite some governments' best efforts to downplay them. Jim shares his "outside in" perspective on US monetary and fiscal policy, and how international players find themselves forced to react. He sees a lot of fundamental imbalances that need to be corrected for, as well as shortages of almost everything developing. In his words, "It's going to be a real mess before it's over."
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In this podcast, Jim explains why:
- Inflation is ramping up worldwide, though many governments are trying to downplay the risk. In fact, the Fed is 'throwing gasoline on the fire' with its prodigious money printing.
- Higher interest rates are inevitable, which will lead to a lower standard of living for everyone - except those who have recognized the risks and invested accordingly.
- Dangerous supply drawdowns are occurring across the commodity landscape (including oil). This will increase the upward pressure on prices.
- Given a future of higher rates, as well as massive debt issuance, Jim thinks it's now time to short U.S. Treasuries
- The world economy is more interconnected than ever. All the players need each other, raising the systemic risk posed if countries start defaulting (which Jim notes is a more common occurance than most people realize).
As with our recent interviews with Marc Faber and Bill Fleckenstein, Jim ends the interview with his specific outlook for 2011.
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Where's the bow tie?
Turd - love your site - but - this crumbling of the metals complex is KILLING ME. Last year it was oh so easy. What say you???
If you own physical gold and have no debt, you can be serene.
Debt and margin are dangerous.
The Bearing is done speculating.
Egypt Boiling Over-Day 3 videos. It appears the government has lost control of the city of Suez which is the gateway to the Suez canal. I wonder if this will move commodity futures...
http://fedupmontrealer.blogspot.com/2011/01/egypt-boiling-over-day-3.html
all we have now is deflation, as measured in true assets: commodities.
Oh yeah, and the robots did a great job keep the DOW up around 10 all day.
Whatever is valuable, is down.
Ah, but there's the dig. Whatever is worthless is up. Hmm, magnetic pole reversal maybe?
I'd like to get Rogers and Shilling in the same conversation. Shilling's advice to buy long UST has been terrific and he's saying, "buy bonds".
One of them is going to be terribly wrong and I'm betting Shilling's got the right answer.
I'll take the opposite of that bet. Jim Rogers is one of the best investor/speculator.
...and he will tell you he is the worst.
Rebalancing of the index funds is the rumor I hear. No biggie - BTFD, bitchez.
Last year was easy if you bought gold or silver in Feb or March. You bought and then cackled maniacally in December. I bought silver at $15.55 an ounce, gold at $1076, have the physical. We're about to get another buying opportunity on the way up to $1600 (if you thought today's clobbering was the bottom in gold and silver, think again). Get your powder ready. Buyin' time is (almost) here.
2 animals enter.
1 bull leave.
Yeah and I spent these last holidays telling the family to load up the truck. Now I'm getting phone calls.........
The rule is tell them to store it away safely (physical) and forget about it for a year. If they do that chances are they’ll be kneeling and kissing your ring come next Xmas. And if not… well, get your passport ready...
LOL!
Ditto. Nerveracking...
[Yeah and I spent these last holidays telling the family to load up the truck. Now I'm getting phone calls.........]---in-Credible Banker
Banker, you did the right thing IMHO. Actually, I'm a bit surprised they took your advise and bought PMs. Everyone to whom I suggest buying PMs give me that "are you into pirates or something" look.
To help with those frantic phone calls you're getting, you might try explaining the "store of value" aspect of PMs---as opposed to the "investment" aspect. The greater purpose of PMs (physical) is in storing the value of one's assets, particularly through times of crisis.
Be honest with them. Explain to them that when gold goes up to $2500/oz---and they're feeling pretty smart---that they really have not doubled their money. What happened is that their US dollars---had they kept them---would have declined in purchasing value roughly equal. So, it's a wash. BUT, they saved themselves from the loss because they "stored" their money in PMs. Not very sexy, I know. But, honest.
(Yes, they actually will come out ahead some because of current PM price suppression, but don't bother getting into that with them. That's a can of worms trying to explain.)
Gold is not a long-term investment. It's long-term storage.
Hope that's helpful.
Well said, but an even greater purpose of PMs is the relative transportability of somewhat anonymous wealth, which goes a long way to explain the big push for full-body scanners in the airports.
You are very kind. Many thanks.
Cheers!
Founder, very well put. You response should be required reading for all those leery of PM's in a fiat, race to the bottom world.
Why would it be killing you to buy it on sale??? I hope people like you GTFO of the metals so the parabolic move up can be done with strength and not speculation.
i co-locate with you, rtm. may the immovable force be with you.
Please define 'sale'. Is it $1300, 1200, or 1000? What if the $1320 we saw this morning is the last time we see this price? Who's going be buying at $2500? Those who wish they'd bought under $1400. I agree in BTFD in PM's and oil. Both are indispensible.
inCB - look at a weekly and cheer up; nice support @ 1250; fibs off july low
1325ish (broken today), next 1292ish
a number of miner equites held up well today.
just last summer it was 1155ish so keep things in perspective
dont overlook food, softs and AGs
Thanks all. Love this site, love all your insightful commentary. My best to you all.
By the way - listening to streaming Schiff radio is great background music while working from home on this snowy day. Recommend to anyone:
http://www.schiffradio.com/
schiff is great.
I'm 100 percent pm's. My life depends on them. And I'm not in the very slightest bit nervous about the prices right now.
If I may...Gold/Silver et. al. are going through a much needed and healthy correction, both have been way over done. And...when the U.S. multinationals etc. repatriate their dollars from overseas earnings, this could strenghten the dollar putting further pressure on the precious metals complx.
I could be very wrong but I think as Gold starts to approach and/or bump up against its 200 day moving average, I'd be buying with both fists. I like silver too, I'm metals "agnostic"...:-)
Hope it helps!
What, you can't handle the drawdown? Get a hedge you fuckin' pussy... And turn in your membership card!
Futures expiry was today. Look for things to turn around early next week at the latest.
only if you do your mental accounting in USD. i have given up long time ago. if you account your wealth in ounces owned, i couldnt care less about the USD price of ounces
Bow Tie here! but seriously, Jim! Recent commodity volatility must be making him a bit hot under the collar.
His fundamental based trades will be A-OK. Bow Tie will return!
At home, Master.
I think the bow tie went out when the new born arrived.
too hot in Singapore to wear anymore...
What assets is he talking about? Those little pieces of paper we gave to the East in exchange for labor and goods? Sounds like a great deal for us. WE ARE NEVER GOING TO PAY THEM BACK.
There, I said it.
What assets is he talking about?
Factories and plants and precious metals and stockpiling of other stuff like rare earths. Plus, China has been albeit slowly moving away from the U.S. dollar--just see their Treasury holdings--and have been accumulating real assets with it. These are the things Rogers is referring to, I'm most certain.
Ok, so the Chinese took a break in January from this strategy? They can slowly move into whatever they want, we will just create more money (to replace their treasury purchases) and export more inflation to them. Inflation in China (see food) would be bad. I see moving away from dollar as a double edged sword for them. OF course they need to do it, but the path to diversification is filled with domestic discontent at home. My point is, our dollars can't be worthless if China is still "buying" things with them.
I can accept however, the "greater fool theory" and China has found a greater fool(s)
I heard a guy who used to head up MFS financial services say once, " If I owe you $10,000 that's my problem. If I owe you 1 Trillion dollars that's your problem."
China can simply reply the favor, sending inflation back to us via an unpegged Yuan. The Yuan rises, Chinese can buy more of everything. Americans? We can buy less of everything with the deflated dollar....
It will happen, but not until the Chinese feel secure enough with their hoard.
So, according to your thesis, our job is to make them feel less secure about their dollar stash?
Ben Bernank?, Mission Accomplished.
Thats why we have to force them to do it before they are ready. Otherwise they win the entire pot.
So, we are in a "War" with China? Interesting thesis, but the "pot" isn't going to be decided with currencies. We all know what road this goes down if that is their intent.
The longer they keep the peg, the bigger the problem. As soon as they dump the peg, America is lost as an export market. The more they diversify away from dollars changing them into "hard" assets, the more inflation we export to replace them as buyers. The more we do this, the greater inflation is at home as they try to maintain the peg. We import Chinese goods and export inflation (oh, and fraudulent "securities" too).
I think your theory could work if China could be a 100% self contained economy selling goods and services to its' own people.
I think the end result is my first point, we all know where this is heading...
You guys should spend 1 week on this site. Your both wrong. They can't " just " de-peg. They funded treasury purchases with yuan debt, they de-peg the PBoC and the banks get blowtorched ..... This is from july after this don't stop reading.
We are doing the 2 step with China -
http://mpettis.com/2010/07/the-pboc-can’t-easily-raise-interest-rates/
...... " Take the most obvious example, the PBoC itself. The central bank officially has about $2.5 trillion in reserves. This by the way almost certainly understates its true position but let’s ignore that for a moment. The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.
Rate addiction
In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation. Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).
The problem for the PBoC occurs not just because of the currency mismatch but also because it needs repressed funding costs to keep it profitable. How much do the PBoC foreign currency assets earn? I would guess probably between 3% and 4%, maybe less. The RMB funding cost, on the other hand, is roughly between 1.5% and 2.5%. This leaves the PBoC with a net positive carry of between 1% and 2%." .......
Victor Shih
Since the publication of my editorial in the Asian Wall Street Journal on local debt, there has been a wave of interest on this issue. Several investment banks have issued reports on local debt, and some of them have disputed my main finding that current local government investment vehicle debt stands at around 11.4 trillion RMB. The World Bank likewise addressed this issue and came up with a much lower estimate on local investment company (LIC) debt. In the discussion below, I outline some reasons why I still adhere to my estimate that existing local investment vehicle debt stands at around 11 trillion RMB. Furthermore, I once again reiterate that local debt is a serious problem which will require decisive actions from the Chinese government.
Some points people have raised about my estimate of local debt:
1. The Chinese government claims that there is only 6 trillion RMB in local investment vehicle debt.
My response: A. This widely cited figure was produced by a 6/2009 CBRC survey of the situation. The exact methodology is unclear, but informants state that the CBRC extrapolated this amount on the basis of a partial study of a few provinces.
B. Other government agencies have provided conflicting and higher amounts. For example, a MOF research team uncovered "well over 4 trillion" in late 2008 (excellent Credit Swiss research even states that the 4 trillion was a YE 2007 figure).
C. The CBRC finding concerns only bank loans, but total debt should also include bond issuance and accounts payable, which constitute triangular debt.
D. if we sum the gross debt of just the top 50 or so LICs, we quickly arrive at gross debt of over 2 trillion (try adding the gross debt of Guangdong Highway, Guangdong Transportation Group, Chongqing Highway, Beijing Basic Construction, Shanghai Urban Construction and Development Company, Shanghai Pudong Development Co., Tianjin Urban Basic Infrastructure, Binhai Development...etc.), so the remaining 8000 or so entities only owe 4 trillion (on average 500 mln RMB each)?
2. The 11.4 trillion is too high when compared with total bank loans in various categories.
My response: A. First of all, total loans outstanding at the end of 2009 was well over 40 trillion RMB, and I think it is completely reasonable to believe that nearly 1/4 of it was loans to LICs. In fact, I wouldn't be surprised that a higher share of bank loans ended up in LICs.
B. Some analysts have trouble believing that such a high share of medium and long-term loans ended up in LICs. When we consider how many LICs there are and the vital role they play in the local economic strategy, it is not surprising that likely as much as 3/4 of new medium and long term loans in 2009 ended up in LICs.
C. Beyond medium and long term loans, many LICs are holding companies with subsidiaries engaged in a wide range of businesses. For example, the LICs run thousands of hotels across China, and loans to these hotels would be classified as loans to the service industry. Thus, in addition to medium and long term loans and loans to infrastructure, it is perfectly reasonable for a sizable share of working capital loans, trust loans, and loans in the "other" category to end up in LICs. Again, gross debt of these entities would also include bond issuance and debt owed to each other.
3. LIC debt can be calculated by subtracting government spending on basic infrastructure from the total infrastructure spending figure. In that light, LIC debt only increased by 2.8 trillion RMB in 2009.
My response:
A. First, as pointed out, LIC are diversified holding companies which do not only engage in infrastructure construction. For example, thousands of subsidiaries of local investment companies engage in real estate development and absorb some share of the real estate loans. The figure generated using the method above, however, may be meaningful one-day when the government decides how much of the existing LIC debt it will seek to take over as part of a bail out.
B. The calculation above assumes that much of the extrabudgetary revenue from local governments derived from land sales went to infrastructure construction. According to excellent research done by Standard Chartered and UBS on land sales, much of the land sales revenue is spent on compensating original residents, leaving only a minority share for actual investment. Thus, a realistic application of this methodology would lead to something like 3.5 trillion RMB in new loans to LICs, not just 2.8 trillion.
4. My estimate of 12.7 trillion in future LIC debt is baseless and is way too high for YE 2011.
My response:
A. To be sure, I now think most of this debt will not realize by YE 2011 also. However, it would not be far-fetched to think that most of this debt will be realize by YE 2012. This estimate is not "baseless" as it comes from the hundreds of lines of credit that banks have granted to local governments. As long as banks more or less adhere to these lines of credit, they will lend this amount to local governments at some point in the future.
B. Although the State Council has called for more caution in lending to local investment vehicles, we still see local governments aggressively trying to raise money from the banks. Hubei, for example, has an investment plan worth 12 trillion RMB, and plans on investing 6 trillion RMB between now and 2012 (please see http://nf.nfdaily.cn/epaper/21cn/content/20100324/ArticelJ07002FM.htm). Of the 6 trillion, at least 3 trillion will come from bank loans and other forms of debt. If Hubei is able to realize its ambition, we are already 1/4 of the way toward my 12.7 trillion estimate. Thus, unless the central government harshly restricts overall credit, I think local governments at the provincial and municipal levels will have no trouble borrowing an additional 12.7 trillion by YE 2011 or 2012.
http://chinesepolitics.blogspot.com/
China has to replace our consumption if its possible. Our consumption is what? 2-30-40% of china's production. Their choices aren't lookin to great, domestic and worldwide? (if the US sneezes, the world catches cold)
....America exports account for a mere 5% of China's GDP. They could dump their entire U.S. Treasury holdings and take us down if they wanted to.
sorry, should read Chinese exports into the U.S. only accounts for 5% of their GDP.
I would be doubtful of that number, even through trade channels including hong kong, singapore etc?
If it was truly only 5% China would be MUCH MUCH more aggressive.
[Those little pieces of paper we gave to the East in exchange for labor and goods? Sounds like a great deal for us. WE ARE NEVER GOING TO PAY THEM BACK.]---Timmay
If you mean US debt obligations, I agree; the US will never pay back all the US debt the Chinese purchased---not with today's dollars.
However, if you mean the trade surplus(nearly 1 Tril US dollars in the central bank of China as a consequence of all the cheap products US consumers purchase) I don't think I follow you.
I can tell you though with some confidence, there will be a grave price to pay as a nation for all the cheap prices we've enjoyed thus far for Made in China. "No such thing as a free lunch" still applies.
- Jan 13, 2011
Gold is “overdue for a rest” and probably will fall after a decade of gains that sent prices to a record, said Jim Rogers, the chairman of Rogers Holdings who predicted the start of the global commodities rally in 1999.
While gold “may go down for awhile,” the metal is “going to go over $2,000 in this decade,” Rogers, who owns gold, silver and rice, said today during a presentation to business executives in Chicago. Gold touched a record $1,432.50 an ounce in New York on Dec. 7. The price closed today at $1,387.
US$2000 is nothing to write home about. Even using todays low of US$1320 as basis for calculation, $2000 at end of this decade only yields 4.7% pa in the next 9 years.
How does that compare to yield in a currency like AUD?
I take it this cocksucker didnt make 15% on TBT puts today
Thank you --Liberals-- like Rogers. Now setting in Asia, with money and industry, communist rulers.... telling the West how.. Fucked... we are. Hilarious!
Is it any better that you are told to go all in on netflix and apple because everything is dandy by the banksters on wall street and corrupt politicians in DC here in the US?
Timmy,
Until we actually default and start printing our paper a different color, the farmers will partially pay them back by sending them grain in exchange for those "little pieces of paper". Boeing will (someday?) be paying them back by sending them airplanes in return for bag fulls of those little pieces of paper. GE will be able to send them medical equipment. And so on. Maybe they only get 10/20 cents on the dollar.
But they kept their people working and learning.
he prolly got the tap from NeBanker.
"Were taking yields down can we get an inflation piece from Rogers or Tepper?" We dont want speculators riding our move
Ohh, I know the fed is loving this one. Fire up the presses.
If there were drawdowns in oil, they happened after November. In November we were at near-record high levels of worldwide oil storage (2.7 billion barrels):
http://omrpublic.iea.org/
I'm too cheap to pay for the December data. Where is this drawdown in oil stocks showing up?
In jim's imagination.
Buttttt if T's go down stocks go up? Right? His predictions are long range.
With the commodity situation, Rogers will have to work. All that money flowing into its coffers, the Asian markets drifting more and more and unable to perform the job of allocating wealth...
Yep, that is work now for Rogers. He will have to find where to park the money by himself. He will have to sit at the casino tables and start to gamble by himself instead of copying others'gambles.
His daughters are already working 12 hour shifts in Da SweatShop. And leveraging that $0.75/hour 40:1 in the futures market. That's real capitalism, baby, not the candy-ass American artifice they left behind.
Yes, long rates will go ever higher while short rates will be zirp 4evah. The spread will be infinity and none of us will have a pot to piss in. I doubt he has the guts to put his "short treasuries" balls where bernanke's mouth is. Mr. Roger's neighborhood is teh ghey.
Jim Rogers is the man! NO masters to please... Regularly calls for an END of the Federal Reserve System (openly on CNBC).
I want my future children speaking Mandarian.
1,300,000,000= people in China... 1/6 of the world's population.
America is finished! It's a gutted pig, deal with it!
No dramatic reset... just a slow grind (People will adapt and all will be forgotten)
A slow grind is probably right. Better than the alternative.
Slow grind is for impotent French curs. Bring it!
The Four Horsemen of the Economic Apocalypse-Jim Rogers, Gerald Celente, Max Keiser and Bob Chapman. Straight forward and to the damn point.
Correction in Gold looks very similar the the one we had in May, June, July and August last year.
Back then it continued to grind higher, making 4 tops, before finally breaking down $100 and bottoming in August before a major run up.
This time round it has made very similar moves over the course of October, November and December, before breaking down about $100 in January and then.....?
We shall see.
http://finviz.com/futures_charts.ashx?t=GC&p=d1
Rogers saying he wouldn't buy Gold now isn't saying much. He regularly admits he is a terrible market timer, he hold Gold anyway so he doesn't care. Same for Silver and other commodities.
Inflation related political instability is good for hard assets. Wish it weren't happening, but it is.
Tomorrow, the Muslim Brotherhood is joining the fracas in Egypt, so look for it to get worse in the oil patch
Inflation?
Copper http://99ercharts.blogspot.com/2011/01/copper_27.html
Crude http://99ercharts.blogspot.com/2011/01/crude_27.html
http://www.zerohedge.com/forum/99er-charts-0
he is legend
major commod correction first 3mths of 2011, then huge spike.
"Higher interest rates are inevitable, which will lead to a lower standard of living for everyone - except those who have recognized the risks and invested accordingly."
Correct me if I am wrong, doesn't JR preach that agriculture is the way to invest accordinly?
"Higher interest rates are inevitable, which will lead to a lower standard of living for everyone - except those who have recognized the risks and invested accordingly."
Correct me if I am wrong, doesn't JR preach that agriculture is the way to invest accordinly?
[Correct me if I am wrong, doesn't JR preach that agriculture is the way to invest accordinly?]---Camtender
Correct. He says farm land and PMs.
Get 'em if you can.
Just for the record - Rogers was talking about inflation when there really wasn't any inflation. He hasn't changed his tune in a decade, probably more.
the die has been cast, we are already in the post consumerist model in the west, and that means Chinacom is going bust
the cheap goods will not be worth shipping, and so the god squad banksters are setting in motion their array of plaques and resultant societal collapse
the numbers in Chinacom and on the S&P must be cooked big time, and so there is only the matter of timing on a collapse of consumerist driven globalism
U.S. is the largest debtor nation in the world and all the assets are in Asia. – Jim Rogers
"Imagine telling Charles Dow 100 years ago about the inclusion of Disney, McDonald's, Wal-Mart, Home Depot, Amex, BofA, & JP Morgan Chase representing American industry for his index of 'industrial' giants'. Dow might have asked, 'What do they produce?’ Without realizing that he was reacting like the Austrian school of economics that holds that wealth must be produced: It can't be borrowed or printed." -- From Ian McAvity's Deliberations on World Markets.
http://www.dailybuyselladviser.com/news/blank/Deliberations_on_World_Mar...
Kyle Bass where are you?
Kyle Bass where are you?
All 100 Ounce Silver Bars Will be Gone in a Matter of Days
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/27_Al...
I won`t say he is correct until I see a breech of the CRB index from its 2007-2008 highs. I believe that the markets corrected before when prices got like this and I see that happening again in the short term to mid term. In fact it is already happening. No oil isn`t headed to $150.00 a barrel and neither is food going to be sky high where all the poor will starve to death. Yes. It is more expensive than last year but compared to what.....the crash in 2008 when prices were as low as they had been over the past ten years or the mean. They are not as high as 2007 so when that happens then I will say, yep he is right. However I think you will see 60.00 a barrel before 150.00 and against the back drop of Case shiller falling into double dip and the Baltic Index double dipping you hyper inflationary fellows may wish to rethink your stance. Has the DOW increased in value against the back drop of a collapsing dollar. Well somewhat but lets see where it goes from here.
cheers,