Chris Martenson Interview With Jim Rogers: Why Inflation Is Raging Worldwide And He's Shorting US Treasury Bonds

Tyler Durden's picture

"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 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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Turd Ferguson's picture

Where's the bow tie?

in-Credible Banker's picture

Turd - love your site - but - this crumbling of the metals complex is KILLING ME.  Last year it was oh so easy.  What say you???

DoChenRollingBearing's picture

If you own physical gold and have no debt, you can be serene.

Debt and margin are dangerous.

The Bearing is done speculating.

Malcolm Tucker's picture

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...

66Sexy's picture

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.

cossack55's picture

Ah, but there's the dig.  Whatever is worthless is up.  Hmm, magnetic pole reversal maybe?

poggi's picture

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.

bruinjoe93's picture

I'll take the opposite of that bet.  Jim Rogers is one of the best investor/speculator.

PeterSchump's picture

...and he will tell you he is the worst.

Citxmech's picture

Rebalancing of the index funds is the rumor I hear.  No biggie - BTFD, bitchez.

Silver Bully's picture

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.

in-Credible Banker's picture

Yeah and I spent these last holidays telling the family to load up the truck.  Now I'm getting phone calls.........

benb's picture

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...

Founders Keeper's picture

[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.


The Alarmist's picture

The greater purpose of PMs (physical) is in storing the value of one's assets, particularly through times of crisis.

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.


in-Credible Banker's picture

You are very kind.  Many thanks.



pslater's picture

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.

Robot Traders Mom's picture

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.

whatz that smell's picture

i co-locate with you, rtm. may the immovable force be with you.

pslater's picture

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.

NOTW777's picture

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

in-Credible Banker's picture

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:

Hephasteus's picture

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.

cjbosk's picture

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!

LowProfile's picture

What, you can't handle the drawdown?  Get a hedge you fuckin' pussy...   And turn in your membership card!

tmosley's picture

Futures expiry was today.  Look for things to turn around early next week at the latest.

h3m1ngw4y's picture

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's picture

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!

just_looking's picture

I think the bow tie went out when the new born arrived.

jedimarkus's picture

too hot in Singapore to wear anymore...

Timmay's picture

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.

6 String's picture

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.

Timmay's picture

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." 

6 String's picture

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.

Timmay's picture

So, according to your thesis, our job is to make them feel less secure about their dollar stash?


Ben Bernank?, Mission Accomplished.

topcallingtroll's picture

Thats why we have to force them to do it before they are ready. Otherwise they win the entire pot.

Timmay's picture

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...

Spalding_Smailes's picture

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 -’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%." .......



Spalding_Smailes's picture

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 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.

Common_Cents22's picture

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)

6 String's picture

....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.

6 String's picture

sorry, should read Chinese exports into the U.S. only accounts for 5% of their GDP.

Common_Cents22's picture

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.

Founders Keeper's picture

[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. 



Spalding_Smailes's picture


- 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.

OddFieldIsStrong's picture

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?