Jim Rogers on Helicopter Ben Bernanke

In the following interview Jim Rogers, famous former partner of George Soros in the Quantum Fund, gives his opinion on helicopter Ben Bernanke and the rate cutting , money printing, activities of the US Federal Reserve Bank.

Jim Rogers is one of the more astute long term investors in the world. He correctly forecast the commodity boom well before it started as well as forecast the tremendous future of China as a major player in the world economy before growth in China really took off.

Jim Rogers has recently moved to Singapore where he can more closely monitor his investments in nearby China as well as enjoy the infrastructure of one of the worlds’ most technologically advanced cities.

The following interview was with Lindsay Williams of the Resource Investor.

Lindsay Williams for Resource Investor speaks with Jim Rogers, co-founder of the Quantum Fund, about the financial woes hitting the U.S. markets - and where to put your money.

RESOURCE INVESTOR: Jim Rogers started the Quantum Fund with George Soros a couple of decades ago, probably three decades ago actually. He’s a legendary investor. He’s a bestselling author and he’s a prolific commentator and never a day goes by when you don’t see him on Financial Times Television or Bloomberg or listen to him on the wireless and he’s on the wireless now.

Jim, before we get into what’s happening with commodities, which is one of your favourite subjects, what do you think about the recent market action?

JIM ROGERS: Not very surprised. I’m just – the only surprise to me is why didn’t it start sooner. I’m afraid we’re going to see much worse before the year’s over. America’s going to be in its worst recession for some time. We’ve had the worst housing bubble we’ve had in American history, maybe even world history. So, unfortunately, it’s not good news. There’s still many problems to be revealed and more losses to be taken.

RESOURCE INVESTOR: Yeah, it really does appear to be so. I wonder what Mr. Bernanke’s going to be doing. But what it amounts to is the same policy that they’ve always employed when they get a small so-called crisis; instead of letting the cycle run its natural course, they chuck money at the problem. Do you think he’s going to do it again?

JIM ROGERS: Of course he is and it’s just going to make it worse, you very astutely pointed out instead of just letting the cycle run its course – the Japanese tried for 15 years to keep propping up, you know, zombie companies, etcetera, etcetera, and it took them 15 years and they’re still aren’t out of the woods. They should just go ahead – recessions are common. We’ve been having them every five or six years since the beginning of time. They’re good. They clean out the previous excesses. They let the system start over with a sound basis.

I mean, obviously, some people get hurt, but we have a lot of safety nets in place now throughout most of the world so that it’s not the end of the world and the amount of money spent trying to prevent a recession in the end costs a whole lot more than just letting the world have its recession then get on with it.

RESOURCE INVESTOR: Yeah, I’ve been writing an article on Allan Greenspan and his tenure for a local magazine, Jim, and I’ve been surprised at looking at some of the quotes that have been attributed to Greenspan ever since he took over as Fed Chairman in 1987. I’ll just read one to you if I may briefly. It says – he said the following back in 2003, 2004, “Innovation has brought about a multitude of new products such as sub-prime loans and also niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. With these advances in technology, lenders have taken advantage of credit scoring models and other techniques of efficiently extending credit to a broader spectrum of consumers.” I mean the more I read about Greenspan, the more I realize he’s at the root of our current problems.

JIM ROGERS: Oh no, of course he is. I mean he’s laid the foundation for the demise of the Federal Reserve. Between Greenspan and Bernanke, we may see the Federal Reserve fail. We’ve had three central banks in America. The first two failed. This one’s going to fail too. I mean if you really – we could spend a whole program, a whole year of programs, reading quotes from Greenspan and you would realize what a fool he’s been.

In my book, “Investment Biker,” I wrote that the man was a fool. I’ve been on TV many times talking about, oh, he just sat and watched CNBC and repeated it and said, “This is the way the world is.” He never got it right, Lindsay. What was so astonishing to me was that his PR machine made some people think he was a smart guy. He never got it right in his entire investing career. I could go back over many of his failures too, but let’s go on with the program.

RESOURCE INVESTOR: Yeah, let’s do. But briefly, before we leave the subject, do you think that Bernanke is just going to become another Greenspan?

JIM ROGERS: He’s worse. All he knows is to print money. His whole intellectual career has been spent studying the printing of money. America’s now given him the printing presses and all he knows to do it to run them. He doesn’t know about markets. He doesn’t know about foreign currencies. We know now he doesn’t even know about economics. I mean, he’s got a PhD in economics and he was a professor of economics, but he doesn’t have a clue about economics.

I will quote you – I hate to quote you, but one more time - I was watching him testify before congress and I almost fell out of my chair. He said under oath, so we presume he wasn’t lying, that he was just a fool, he said if an American only buys American products, it does not matter to him if the value of the U.S. dollar goes down. He will not be affected. I was looking at the man to see if he was lying, giving government propaganda, but then I could see he didn’t even really understand.

He didn’t understand if, you know, even if say I’m an American, Lindsay, and I only buy American tires. Well if the price of foreign tires goes up, obviously the price of American tires are going to go up too. Plus, if the dollar goes down, the price of rubber’s going to go higher, etcetera, etcetera, etcetera.

So the man doesn’t even understand economics. He’s going to print money. He’s going to throw money out the window. The dollar’s going to go down further and further and further. Inflation’s going to get worse and worse and worse throughout the world – the world, not just America - and we’re going to have a worse recession in the end.

RESOURCE INVESTOR: He says that the inflation problem is a lesser problem than a slow-growth cycle. What would be your comment on that analysis?

JIM ROGERS: Well, no. You know better than that. Inflation damages everything. It distorts all economic planning, all economic decision making. A slow economic profile or whatever he called it – we get over recessions. They end. But once you start embedding inflation into the entire nation’s economy, that’s one thing. Then it changes everything. It changes currencies. It changes foreigners’ perceptions of their own economy, their own currency, their own cost of doing business.

You know, what he’s doing is going to – he’s trying to save a few guys on Wall Street, a few friends on Wall Street, but what he’s really going to do is damage 300 million – well not just 300 million Americans - he’s going to damage the whole world. But he doesn’t care. He’s just looking to save his friends on Wall Street, and he thinks he’ll go down in history as a smart guy. Going to go down in history as one of the two gigantic failures of central banking.

===== End of Interview Quotation ======

As you can see Jim Rogers is not very positive about the direction that things are headed for with the US and world economy. A drastically falling dollar, heavy doses of inflation, and failed Federal Reserve Bank policies, perhaps even a failed Federal Reserve bank, would make for a scary stock market investment world should any of Jim’s predictions come to pass.

However, what may become a disaster for many investors may well open the door to amazing success for others. For example, those who have been buying precious metals over the past few years have had a tremendous bull run in prices with probably a long way to go. $2,000 an oz gold doesn’t seem nearly as far fetched now as it did a couple of years ago.

For sure, those who have been on the long side of Euros, Japanese Yen and other currencies have had a good run of profits. While current market volatility can be a short term trading challenge, betting that Jim Rogers is right about continued  pressure on the US Dollar given Bernanke’s tendency to try to rate cut and print his way out of the structural problems faced by the US economy seems to me to be a good bet.    

By pulling out all of the stops to avoid a recession in an election year Bernanke is sowing the seeds for a much worse dose of inflation in the not too distance future that will be extremely difficult and painful to control . 

No government in the history of the world has been able to run the money printing presses full speed ahead for long without destroying the currency. It’s a very disturbing sign that the Chairman of the Federal Reserve Bank, Ben Bernanke, seems to think that the US will somehow be immune from the consequences of the creation of run away fiat money.   

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