Jim Rogers: "Nobody Gets Out Of This Situation Until There’s A Crisis"

Tyler Durden's picture

The following is GoldMoney contributing author Felix Moreno's interview with famed investor Jim Rogers. We hope you enjoy it.

Félix Moreno: Please tell us about your new book, Street Smarts. What was your motivation for writing it?

Jim Rogers: To my surprise people tell me it’s my best book. I never would have expected this reaction. I’ve written a few books about specific things, but my publisher said, “look, you’ve never sort of pulled it together: how did you get from the backwoods of Alabama to Singapore” – among a few things. I had a few setbacks along the way, and a couple of successes. So I sat down to put it all together in the book, how it all worked and everything seemed to be worth it. Some people seem to enjoy it, to my delight.

FM: I enjoyed it – I especially liked the story about your start at the Quantum Fund and your trading days, before retiring at 37. I also enjoyed your book Hot Commodities, in which you talk a lot about the current bull market in commodities. You set up your commodity index fund in 1999?

JR: It started on August 1 1998. The first bull year was 1999.

FM: You always say in your interviews that you are not a very good market timer, but I beg to differ. I’d like to turn to gold: you are one of the few gold bulls who had actually been calling for a correction in the past few months, or at least saying that we were in a correction and that, even though you were very optimistic in the long term, we should expect lower prices now. You must feel vindicated now.

JR: Every once in a while I get it right. Even I get it right sometimes. Vindicated? I don’t take any great pleasure in it. I just talk about the way the world works. It’s reality. Unfortunately some people don’t like to see how the world works, but yes, I did happen to get it right this time.

FM: So what is your opinion on the current state of the gold bull market. You’ve said repeatedly that you expect it to go much higher this decade. How do you see it right now?

JR: Unfortunately from my point of view, and I own gold and haven’t sold any, we are in a long overdue and much needed correction. The anomaly was that gold had been up 12 years in a row. That’s not normal, typical action. It’s abnormal, which worries me and should worry all the gold bulls. It has now corrected for some 18 to 20 months now. I find that encouraging. I mean, I don’t know, because I’m not a very good market timer, but I do know that most corrections go on long enough to scare a lot of people and scare them out of their positions, and that’s what I would expect to happen.

I’ve had people write to me and say: “gold cannot go down 30%”, and I say: “turn on your computer. It’s there.” There are a lot of mystics that are still true believers. Until it scares a lot of people the correction is not over. I would certainly like the correction to be over this afternoon and see gold go to $2,000 or to $3,000, but that’s not reality.

FM: You are one of the few well-known investors who actually says when he is buying or selling something. Most are scared of giving away their secret formula. What percentage of your portfolio is in precious metals?

JR: First of all I won’t say, but second of all I don’t know. I don’t have a committee that I have to answer to, so I don’t have a clue. I do know that I own a fair amount of precious metals, I’ve been buying them for years and I never sold them.

FM: Are you more invested in gold or in silver?

JR: Value wise more in gold, because gold sells for many multiples of the price of silver. But maybe I own more ounces of silver. But so what? Gold is so much more valuable.

FM: You write that you concentrate very much on fundamentals. However you lump gold in with other commodities in several of your books. Do you analyse gold as a commodity or do you look at it as money?

JR: Everybody has their own view. Mine is that gold is not money until you can go into a shop and get someone to accept it as money. Gold, certainly in recent decades, is nothing more than a commodity. Yes at times it has been money in the past, but so has silver, so have seashells, so have cattle. A lot of things have been used as money. Silver has been money more than gold historically, and throughout the world there is a lot more silver around.

FM: But you have to admit that gold isn’t easily valued as other commodities are. After all inventories of gold and the stock-flow ratio are very different from soybeans, rice or oil. The amount of gold that is mined or produced or recycled each year is very small compared to the stock of gold sitting in bank vaults and central bank vaults. So it’s hard to value gold using supply and demand, or at least annual supply and demand like with other commodities.

JR: If you mean annual supply and demand by the amount mined and the amount consumed, yes. The amount mined and consumed is very low compared to the overall inventory of gold. All the gold ever mined is still somewhere and that is going to continue for the foreseeable future. From that point of view I guess it is harder to value – to figure out the price of gold – rather than wheat for instance.

FM: I have to ask: have you heard of Bitcoin? Do you own any?

JR: I’ve heard of Bitcoin, I’ve never taken the time to figure out how it works and what it is. I know it’s there.

FM: You talk a lot about the future of China. You mention that China is the only one of the BRICs that you see having a very bright future. In fact you say that the acronym is off by only three letters. But why China? What makes it better than, say India?

JR: Have you ever been to India? If you can only visit one country you should go there. It is the most exceptional country in the world from a tourist point of view. But from the point of view of doing business, it’s the worst bureaucracy in the world, and the infrastructure’s a nightmare. It’s a very extraordinary place to visit – the languages; the man-made and natural marvels; the food; the religions; the languages. It’s extraordinary, but not as a place to do business unless you are in with the right people. If you are in with the government – the right part of the government – yeah, you’ll make a lot of money. But otherwise be very careful.

FM: Would you like to comment on property rights in Singapore? As you might know GoldMoney has recently opened a vault there, because it’s one of the countries that respects property rights and gold will be safer from confiscation and high taxes there.

JR: Well, I live in Singapore. Singapore does respect property rights and it’s an efficient and, from my point of view, terrific place to live. Who knows what’s going to happen over the next 50 years, but at the moment it is one of the sounder places to have assets. Whether the new gold vault here will work, I don’t know. But I do know that Singapore is a sound place to have assets.

FM: You don’t expect some populist politician suddenly sticking a huge tax on it?

JR: I would not expect that to happen on Singapore. I would expect it to happen in other places, maybe in the US.

FM: In your book you call the US “The largest debtor in the history of the world”.

JR: That’s not an indictment, that’s a fact. If you consider it a negative fact, it’s an indictment. It happens to be a fact that it is the largest debtor nation in the history of the world. The debt is going through the roof, you know with all the shady rates. I do criticise it. I don’t like it. I’m an American citizen. I’m an American taxpayer, so I hate what’s happening with the debt situation in America. No nation in history has gotten itself into this situation and got out without a crisis. So I guess it is an indictment.

FM: I Do you expect the US politicians to do something about the debt? To balance the budget any time soon?

JR: No, not at all. Not either the present politicians or future politicians. The situation is so dire that it would be almost impossible to balance the budget and pay down the debt without an enormous amount of pain. Now suppose that somebody could win an election on that platform – well within six months or a year or two, he would either be assassinated or give up because the people would say “wait a minute, we didn’t know it was this much pain. This is not what we had in mind” and he would be thrown out and his policies reversed. No it’s not going to happen until there’s a crisis or a semi crisis. That’s the lesson of history. Nobody gets out of this situation until there’s a crisis.

FM: What would you say to those that see the current situation as perfectly sustainable, especially in reference to the money printing, quantitative easing, etc.

JR: I would suggest that they get out a couple of simple history books and see if there has even been a way out. For what it’s worth, there has not been and there won’t be. I suggest that they look it up. They don’t have to listen to people like me, look it up.

FM: Do you think that Bernanke and the Fed have an exit plan from QE and zero-rates?

JR: Mr Bernanke’s exit plan apparently is that he is going to leave his job. He doesn’t want to stick around for the hangover. He doesn’t want to be around for the consequences of what he’s doing. I don’t know if there’s an exit plan. If and when they stop it’s going to cause lots of ramifications in the market and lots of, perhaps even chaos, but certainly turmoil and upset. The only exit plan that he’s talked about is to let it all mature. That sounds wonderful, but it’s not very practical.

FM: It seems that the whole “let’s get out before it crashes” worked well for Alan Greenspan.

JR: Well, Alan Greenspan did get out before it collapsed, more or less, but if nothing else, history has figured out that he is a charlatan who didn’t know what he was doing in the first place.

FM: So you don’t think that they have an exit plan. Does that mean that you are in the inflation camp? Do you think that the crisis is going to come from high inflation like in the ‘70s and ‘80s, or are you in the deflation camp? That it will come through bankruptcies, banking collapses and debt defaults?

JR: Throughout history when you print staggering amounts of money, it has always led to inflation. Now, you can have an inflationary boom, an inflationary feel-good period, but usually the politicians just keep printing. No politician is going to run on a platform, or could get elected on a platform of “we are going to have pain”, so they are going to continue to print money. You know as Mr Bernanke is doing, the BoJ, the Bank of England, the ECB. They all say the same thing. They are all doing the same thing. So they are going to continue to print money. Eventually of course what always happens is that inflation gets higher and higher and then the bubble pops and you have deflation and harder times. But between here and there is a long way, because they are not going to stop printing money. That’s all they know how to do. It’s the wrong thing, but it’s all they know to do.

FM: Capitalism without bankruptcy is like Christianity without hell and you give examples of banking crises where there were no bailouts. What is your opinion on the bailouts?

JR: It’s not supposed to work that way. You are not supposed to take money away from the competent people and give it to the incompetent so that the incompetent can compete with the competent people with their own money. That’s not the way capitalism is supposed to work. That’s not the way morality is supposed to work. I know politicians don’t care about morality. It’s not going to work. You see what happened in Japan. Japan has had two lost decades. Their stock market is down by 70-75% from where it was 23 years ago. This system has never worked.

In the 1920s America had this problem and America balanced the budget and raised interest rates. I repeat: balanced the budget and raised interest rates. They had a terrible 18 months, but then they had the most exciting economic decade in American history. Scandinavia did the same thing in the early ‘90s. When the Japanese were refusing to let people fail, the Scandinavians let people fail. They had a terrible two or three years, but since then Scandinavia has been an extremely strong and exciting part of the world.

This way (the bailout way) doesn’t work, and there are no examples of something like this having ever worked. It’s not going to work this time either.

FM: Some argue that a current example are the eastern European countries: Estonia, Lithuania, etc, who made big cuts within one year of the crisis and are now growing faster than the rest of Europe.

JR: There’s no question. You can look at other places: Iceland, Ireland – you know, the places that did take some pain have certainly done better than the places that denied reality.

FM: From the Spanish perspective, it’s certainly not better to have a lost decade or two by trying to postpone all the big budget-balancing hard work.

JR: You can postpone it all you want, but the problems just mount. There is no country in Europe that’s going to have lower debt this year than last year, or lower debt the next year than this year. Every one of them will run up the debt, instead of decreasing the debt.

FM: Do you expect the Euro to lose the currency wars? Which will fall down the cliff first? The yen, the euro or the dollar?

JR: It depends on what standard of measure you are talking about. The Japanese claim that they are going to print “unlimited” amounts of money. That’s their word, not mine. Unlimited amounts of money. I would expect the yen to go the furthest the fastest. But America has also said “wait guys, we’ll print a lot of money too” – though they didn’t say “unlimited”. And the British said “we should do it”.

So I don’t really know. It’s a very good question, which one to own. I don’t own the yen, because “unlimited” is a pretty hefty amount of money. I grapple with this every day, which currencies to own. Believe it or not I was even contemplating putting money into the ruble – only because it seemed less flawed at the moment than these others.

FM: You seem to have had a change of heart recently regarding Russia.

JR: In recent months I have seen that Mr Putin and people in the Kremlin have changed their attitude. It will take a while for all this to sink in. They said for many years that they welcomed foreigners and capital, but they were lying. They shot you, they put you in jail, and they confiscated your wealth. But now Mr Putin seems to understand that he has to play by international rules, he cannot go on putting people in jail and taking their money. If he wants to play on the world stage he has to treat international capital, and domestic capital, in a proper way. You can ask me in 10 years if I got it right or not.

FM: The Russians are more friendly to depositors than the Cypriots – and perhaps many other jurisdictions as well.

JR: Well, what happened in Cyprus as you know is that most of the big depositors were foreigners. It’s always easy to take advantage of the foreigners. 125 years ago America threw the foreigners right, left and centre. Nearly all developing countries find a way to take advantage of foreigners. It’s not a particularly good comment on world society. Cyprus voters did lose money, but nothing like to the extent of the foreign folk.

FM: On the other hand there are a few countries that do welcome foreign money like Singapore or Hong Kong.

JR: It might just be an anomaly of history. We can look back in eight years and see if Singapore and Hong Kong are still welcoming. I suspect they might do, but unfortunately throughout history there have been countries that welcome money, but then they get fat and lazy and they become anti-foreigner and confiscate their money. I don’t think you can find any country in history that has consistently welcomed foreigner’s money for centuries. Yes, for a century or two or even three maybe. But nobody has a history of always welcoming foreign money.

FM: But it gives hope to see that Hong Kong and Singapore changed China. Perhaps another “lighthouse city”, another good example could change Europe, Latin America…

JR: As long as my lifetime and my kid’s lifetime – I guess that would be more than most people can expect.

FM: You have become very favourable towards competing currencies as a solution to the crisis of fiat money.

JR: That’s the only solution that has ever worked long term. Nothing has worked a long time – including gold, silver, seashells, cattle. Nothing has worked long term except that you choose your money.

FM: You write about how you opened a Swiss bank account in the ‘70s. Could you do so today?

JR: It’s getting more and more difficult for foreigners – for Americans I should say – to open bank accounts anywhere in the world, because of the problems with the US government. I’ve had places where I’ve had accounts for years who have called me to say “look we love you, but we have to get rid of all American accounts”. It probably is possible to open a Swiss bank account, but I don’t know, I haven’t had to do it in a long time. I still have my Swiss bank accounts, which are all reported by the way, but it is becoming a problem for Americans.

FM: FATCA and the growing amount of regulation is one reason why so many are looking to Bitcoin and cryptocurrencies in general.

JR: Yes, it’s becoming a huge problem for Americans, honest Americans at least.

FM: What would you tell American leaders and politicians?

JR: Resign.

FM: The same thing to Ben Bernanke?

JR: No, Bernanke I would tell him to close the Federal Reserve and then resign.

FM: So you wouldn’t want, for example, Jim Grant as Fed chairman?

JR: I know Jim and I like him, but he has some ideas I don’t think would work. He’s a wonderful goldbug and has been for many years and is convinced that the gold standard would solve America’s problems. You know, the gold standard didn’t work either in the long term. They found ways to get around it. Or they just abolished it. The gold standard has its own problems too. The only way to survive is to let people decide for themselves what they want to use as money. Someone can use gold, or we find enough people who want to use seashells, or whatever.

FM: So competing currencies and may the best money win?

JR: It’s the only solution that has worked throughout history. Every government imposed, every dictated from of money has always failed. Including the gold standard.

FM: Yes, although the gold standard does have a record of lasting hundreds of years on several occasions. But I agree, nothing lasts forever and it’s better to have something that can evolve, not imposed from the top down.

JR: I’m not sure I know a case where the gold standard has lasted hundreds of years, but if you say so, yes. Gold has certainly had recurring uses. Not necessarily the gold standard, but gold itself has had recurring uses many times in history. But as I said before, silver has been used more historically than gold around the world, and so have other things.

FM: In fact China has used silver for a very long time. A lot of Spanish silver dollars ended up in China when they were kicked out of the US.

JR: Yes the Chinese have a longer history of silver than they do of gold, but again, many places do. Jesus was sold for 30 pieces of silver, not 30 pieces of gold. Silver was the predominant currency back in those days, in that part of the world.

FM: China has also had a long history with paper money. If there’s one constant in the history of money it’s that paper money never seems to last more than 40 or 50 years before blowing up.

JR: Paper money doesn’t have a very glorious history, but again, nothing imposed by the government has a very long and glorious history.

FM: On that positive note, and hoping for many good things to come in this new century, I’d like to thank you for talking to GoldMoney, and hope that you will be back soon.

JR: I’m delighted. Thank you very much. Let’s do it again.

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jomama's picture

this isn't fvcking yahoo!.

HulkHogan's picture

Yeah, and he forgot to say bitchez.

TwoShortPlanks's picture

A crises you want, a crisis you'll have!

A contraction in the property market will give Central Planners a justifiable and defendable  ‘Green Light’ to devalue against Gold. They will stand on podiums around the world and repeat Draghi’s words , "[we will do] whatever it takes… no taboos… And believe me, it will be enough".

http://twoshortplanksunplugged.blogspot.com.au/

"A Piece you'll have" Mr Rogers! http://www.metacafe.com/watch/an-nkTeb7mmJhbJmm/the_chronicles_of_riddick_2004_fighting_back_and_capture/

sitenine's picture

@TSP, Syria is looking pretty ripe to set off a crisis as well. RT reports that S-300s have been delivered, and that Israel says it "knows what to do."

http://www.youtube.com/watch?feature=player_embedded&v=1r_3Nf2jWPU

You know, I kind of wish we still had Clinton instead of Ass Clown Kerry as our Secretary of State - at least she would have had something clever to say..

A is A's picture

Haha! Best quote ever! Capitalism without bankruptcy is like Christianity without hell

shovelhead's picture

I agree that Clinton as SS has truly mastered the art of the soundbite:

Screeching "What difference does it make?" while pounding her fists makes her ascend to the historic pantheon of diplomatic eloquence as Chamberlin's "Peace in our time" and Nikita's "We will bury you" and his shoe pounding.

She has secured her place in history.

iDealMeat's picture

+1..   Pole Position is a rite of passage on ZH...

 

I take solace in my days of dealing with the ole Math check for posting.. That was awesome.. Even when you were right,

 

you were wrong..

 

Boeing Boy's picture

Obviously not a TF metals reader....no sense of humour either, must be American

Common_Cents22's picture

He's the guy who camps out at best buy for 4 days to be the first to save a few bucks on useless gadgets on black friday.

buzzsaw99's picture

write "bitchez" next time or "fuck bernanke" and everyone will love you long time. ;)

williambanzai7's picture

But I  will be here to remind everyone...

 

BERNANKE 2019

Jim in MN's picture

1st to up arrow this!   Benitchez!

flacon's picture

I just made that my facebook profile photo. 

akak's picture

Q: Why do the homeless pee in their pants and scream at the pigeons in the park?

 

A: Tradition.

putaipan's picture

it's like bernake meets opie's brother ...... in real life.

jerry_theking_lawler's picture

wb7....one of  your best piece yet....keep it up.

Hulk's picture

2nd !!!

WTF does Rogers know anyway ???

/s

Harry Dong's picture

I give you a +...I don't think others saw your /sarc\

Also recommend:  Adventure Capitalist: The Ultimate Road Trip.  

(Wife seems to be the real deal too)

http://trekity.com/paige-parker/

Hulk's picture

I started studying Rogers 25 years ago, before I started amateur trading. He's a great teacher...

ILLILLILLI's picture

He's just a regular guy who speaks plainly...

flacon's picture

Except regular guys don't seem to have common sense, but Rogers does. 

HulkHogan's picture

And he's very short. Seen him in videos and he can't be more than 5'4".

DanDaley's picture

Good book, and loved how he tells about how one day he realized that his boss, Soros, would "F" him over in a nano-second...which led to a parting of the ways.  He has some scruples.

Spitzer's picture

I see the /s

But he seems to think that it is not normal for gold to go up for 12 years yet I guess he thinks its normal for US treasuries to go up for 33 years.

Hulk's picture

Rogers will be the first to admit that he is often wrong, and an awful market timer....

Midas's picture

The best market timers are the insiders. (and/or congress)

new game's picture

one elusive cocksucker...

Bring the Gold's picture

I've already used this clip today but...

 

http://youtu.be/SjbPi00k_ME

 

Don't worry there will be a whole bunch of apologists, shills and folks with nary an adult sex organ between them who at any moment will rush in and denounce this as a spotlight grabbing woman with no credentials. Or that she has paranoid delusions or whatever. 

francis_sawyer's picture

Yeah, well if you search 'Hudes' you run into this firsthand...

~~~

http://israeltruthtimes.blogspot.com/2013/05/amazing-interviews-of-karen...

What's that? Like a cheesepope version of 'stormfront'?

IrritableBowels's picture

Before you give her too much credit, listen to her interview on Coast to Coast AM with John B. Wells.  Very telling and I'm not going to spend any time on her and her story. 

C2CAM

Rarely was gold mentioned. "Honest" money, nor fiat was ever discussed.  She made claims that she wanted to go BACK to the World Bank to "regulate" it and pretty much stated that the WB was a necessity to progress and success and the dollar COULD NOT FAIL.  I don't buy it at all.

fonzannoon's picture

I live 10 minutes from the water. seashells=hedging

kito's picture

Fonz, last several years Rogers was screaming how he liked silver over gold.....that silver had more upside.....now it's gold......and notice how he threw in the phrase "semi crisis".....as if to say it won't get tat bad before things turn around or the u.s..........he's changing his tune..........

fonzannoon's picture

what i found funny was not the gold/silver difference but the seashell/competing currencies reference.

When it came to Jim Grant he was basically putting down a gold standard and stated that it had not been nor would be successful.

he is fine with me giving you spinach for a box of nails. I guess I am fine with that too.

Here is another thing. in 2011 he was saying 2012 we were screwed. in 2012 he said 2013 would be the year. Earlier this year he says it's 2014. He knows it's coming but he also knows it's worthless to forecast.

That is why i still like Schiff. He just screams "run for your fkin life!!!!!!!!!!" all day long.

simple.concise.efficient

LetThemEatRand's picture

I love what Jim Rogers says, but I'm starting to come around to the idea that he's an oligarch.

newengland's picture

Rogers and Soros are salesmen for the oligarchs; the paid help.

putaipan's picture

thought i better splain my reddy before i deliver it. i think rogers' independent last freeman standing lifestyle and position might look a little oligarchic, but there is a big differrence between that and sellin your brother man down the tubes for your own personal profit and the joy and accolades of your evil overseers. hence one red downy for each of you!

Bring the Gold's picture

Good cop, bad cop?

I dunno he worked pretty closely with georgie pooh for quite awhile. I don't generally trust Billionaires on principle. It's pretty hard to get there without a little help (just take a look at the Russian Oligarchs) and a whole lot of ruthless.

disabledvet's picture

"what's your opinion on running a gold mine? does it even interest you? why do you think it interests all those little people out there." obviously the USA stands out as VERY welcoming to foreign money. only under gold money and victory in World War II did the USA really have a "bought and paid for economy." i find it very interesting how welcoming foreign debt holders are to the USA since Nixon and all those "good Republicans" back then. not that the Democrats are any different now. "money is what you give me...bankruptcy is my gift to you." hmmmm. who are the revenue generators again? the Producers?http://en.wikipedia.org/wiki/The_Producers_(1968_film)

lolmao500's picture

On Bernanke: "He doesn’t want to be around for the consequences of what he’s doing."

So Bernanke plans to commit suicide within a year or two?

Harbanger's picture

Why? They would only reappoint a new chairman.  I read Obama is looking to replace him with Janet Yellen before his 2nd term is over.

pomlad5's picture

I've heard Obama has enough assets to by Mars and Jupiter and to change the pathern Earth travels across Universe

Muppet Pimp's picture

Laughing so hard right now...