2 March 2009

Interview with Jim Rogers ~ Dateline SBS

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When US financier and Wall St veteran Jim Rogers speaks, the investment community tends to listen.

And if they've been listening lately to the Singapore-based former business partner of George Soros, the news is not good.

He's no friend of Gordon Brown since declaring that Britain is "finished" and he says around the world "politicians are making it worse not better" by meddling with the bad banks.

"Let them go bankrupt and clean out the system," he says.


Given the severity of the financial crisis preoccupying the globe, Barack Obama's $800 billion stimulus package was meant to grab the world's attention. But did it? When Wall Street veteran Jim Rogers speaks the investment community actually tends to take notice. After all, he is a former business partner of billionaire philanthropist George Soros. Earlier this month, he raised the ire of Gordon Brown when he declared Britain 'finished' and urged investors to dump the sterling. So, what does this outspoken monetary maverick think of all those monster stimulus packages currently being doled out from Washington to Canberra? George Negus spoke with him earlier from his base in Singapore.

GEORGE NEGUS: Jim Rogers, thanks for your time. As I understand it, your views on the current world financial and economic crisis are pretty blunt. I mean, is it true that you believe, given that we've been hearing from Barack Obama all week about his stimulus plan, that it is actually going to make things worse, rather than better?

JIM ROGERS, CHAIRMAN, ROGERS HOLDINGS: For the people who get the money, George, it is going to make it better for them but for the rest of the country and the rest of the world, no, it's not going to make things better. It's going to make things worse. We are in perilous times and he doesn't seem to understand that he is making things much worse.

GEORGE NEGUS: I guess I have to ask you - and I know that you have had years of experience on the financial markets - does anybody really know - let alone the cause of this - what the solution is?

JIM ROGERS: Well, I will tell you what has worked in the past, George. What has worked in the past is you let people go bankrupt. When they fail, you clean out the system, you take a year or two or three of paying whatever it is, and then you start over. The competent people come in, take over the assets from the incompetent people and you start over.
This way of bailing out everybody in sight, it doesn't work. The Japanese tried it in the 1990s. They had zombie banks and zombie companies and they still talk about the 1990s as the lowest decade. It is 19 years later in Japan since they tried all of that. The stock market is down 80% - 8-0-% from where it was 19 years ago. This has never worked. It doesn't matter... I am not doing it ideologically here, I am saying this has never worked. The things that have worked are - take your pain and start over.

GEORGE NEGUS: So, you are saying all this bailing out that is going on - because bailing people out seems to - as you have suggested - be the way that everybody thinks we should go. That's what the stimulus packages are all about - to get people to spend more money. I mean, there's no way in the world that you or me or anybody else is going to stop the Obamas and the Browns and the Rudds of this world, in our case, from going ahead with the stimulus packages.

JIM ROGERS: I am afraid you are right. All of these politicians, they run around and think they've got to be doing something, and if they can pass out enough money they hope they will get through the next election and some day things will be OK. Unfortunately, they are not going to be OK. The only way that we are going to get rid of them, George, is that these programs are going to fail and then they'll be thrown out of office.

GEORGE NEGUS: What about our friend Mr Bernanke saying that it will be all over by the end of this year? He's a little more optimistic than yourself, to say the least.

JIM ROGERS: George, Mr Bernanke has never been right - he's been in the government for six or seven years, he has never been right. If I came on your TV show every week and was wrong eight or nine weeks in a row you would probably stop inviting me. Mr Bernanke has been wrong 300 weeks in a row and he has never been right. If you get your advice from Mr Bernanke, George, you are going to go broke very quickly.

GEORGE NEGUS: And you are apparently not a fan of the current Secretary of the Treasury either.

JIM ROGERS: Oh my God, you are bad for my nervous system, George, No, of course not. Mr Geithner was head of the New York Fed for several years. The New York Fed was the group that was in charge of Wall Street and the major commercial banks. He sat there and saw all this happening. He's part of the problem. It is astonishing to me that Mr Obama ran on a platform of change and he's brought in people who caused the problems and are there now supposed to solve the problems.

GEORGE NEGUS: What about the countries that are vital to the economic structure, the infrastructure of countries, like the US and the UK and even our own, that are too big for us to allow them to fail?

JIM ROGERS: What do you mean too big to fail? There's no such thing as too big to fail. Listen, there are plenty of banks in Australia, America and other places who have been doing what they were supposed to, minding their manners, not going doing crazy things, waiting for these moments to come so that they could come in and expand their market share and grow and prosper. Now, these people are being held back by all these "banks that are too big to fail" because the governments are giving them free money and saying, "OK, now you compete with the competent people." I mean, George, this is horrible economics and it is outrageous morality. Not that politicians care about morality.

GEORGE NEGUS: Jim, why shouldn't we see you as yet another doomsayer?

JIM ROGERS: I am not a doomsayer. I am very optimistic about a lot of things.

GEORGE NEGUS: Make me feel better then, Jim, because you are painting a pretty bleak picture.

JIM ROGERS: Listen, we have to face reality, George. I have. If you don't face reality and you sit there and twiddle along and believe Mr Bernanke that everything is OK, you are going to get hit by a two-by-four and it's going to hurt very, very, very badly, so I would urge you to be prepared. But some parts of the world's economy are going to boom. George, you should become a farmer. Agriculture is about to become one of the most exciting industries in the world for the next 20 or 30 years. There are plenty of people in the world who are going to do extremely well in the times that are coming up, but it's not Wall Street, it's not the City of London - the people who have been driving Lamborghinis for the past 10 years are suddenly going to have to drive taxis. Maybe they will learn to drive tractors so they can work for the farmers who will now have the Lamborghinis.

GEORGE NEGUS: Gordon Brown wasn't exactly impressed when you told him that Britain was finished, and that you will pulling out your sterling and told everybody else to do the same. It had a big impact in the UK. What are you doing with your American dollars?

JIM ROGERS: Well, I do own US dollars but I plan some time this year to get rid of the rest of my US dollars and my few remaining US shares.

GEORGE NEGUS: Seriously? And invest where, Jim? Where are you going to put your money?

JIM ROGERS: Ah, George, that is a brilliant question. I don't know right now but it looks as though I will probably wind up putting a lot of it into real assets such as cotton or zinc or gold or oil or whatever it happens to be.

GEORGE NEGUS: Into the real economy, Jim, I can say, into the real economy, not the unreal economy of the finance world.

JIM ROGERS:Absolutely, I'm talking about real products which people use every day. You and I know what cotton and silk and zinc are, most of us didn't have a clue what dotcom was or what a CDO was and yet there were billions of dollars put into them and that's all going to change now, George. Those days are over. The financial community is going to be a very, very bad place to be for another 10 or 20 or 30 years.

GEORGE NEGUS: Are we looking at not the Great Depression but the even Greater Depression?

JIM ROGERS: If you ask me, yes, we are going to have another depression in the United States because the politicians keep bungling. That's what caused the Great Depression in the 1930s - politicians around the world made mistake after mistake after mistake and I'm afraid it's happening again, including protectionism.

GEORGE NEGUS: You don't blame, like so many people are, the bankers and the hedge market players like yourself. They are not to blame, it's the politicians?

JIM ROGERS: It's mainly central banks, more than anybody else. If you have only have one single cause it's the central bank in the United States. We had a man named Alan Greenspan running the central bank. He refused to let anybody fail. Any time people got into trouble they would call up and say, "Save me, save me, save me." He would bail out everybody. Had he let the market work, had he let people fail over the past 15 years, Lehman Brothers would still be in business. Bear Sterns would still be in business.

GEORGE NEGUS: Jim, let us finish on this note. Here in Australia, we're on the stimulus bandwagon, for better or worse, rightly or wrongly, what's your feeling about this country at the moment? Because they seem to be going down the same - our mini-version of the Barack Obama trail?

JIM ROGERS: Australia should be one of the countries that's going to come out of this in good shape. Because you have lots of natural resources. I said before that people who are now going to inherit the earth are going to be people that produce real goods, such as Australia. Unfortunately, your politicians are a bad as American politicians - they keep spending money on projects that are just make-work projects rather than building for the future. Look at China and Singapore, for instance - they are mainly spending money trying to make the countries more competitive down the road.

GEORGE NEGUS: You seem to be saying that this country is kidding itself if we still regard ourselves as the lucky country.

JIM ROGERS: While Australia has been a lucky country at times I'm afraid Australia's not so lucky right now because your politicians keep making mistakes, just like mine do.

GEORGE NEGUS: Jim, it's good talking to you. I hope that next time we talk things are looking a little brighter. I hope that your optimism for the long-term future we see a little earlier maybe.

JIM ROGERS: George, go become a farmer.

GEORGE NEGUS: I will think long and hard about that, Jim. Sounds like good advice. Thanks for your time.

JIM ROGERS: Thank you.

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