Jim Rogers Interview

Jim Rogers: An Exclusive Interview With The Legendary Investor

by Keith Fitz-Gerald
Investment Director, The Money Map Report
Wednesday, April 9, 2008: Special Feature

*Editor’s Note: This article has been reprinted with permission from MoneyMorning.com

Our friend and colleague Keith Fitz-Gerald just traveled all the way to Singapore to sit down with legendary investor Jim Rogers.

This morning, Keith, the Investment Director of the Money Map Report, released the transcript of his interview for the first time to Money Morning readers. And he’s agreed to share it with us, too.

We suggest you take notes

Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

Since then, Rogers has traveled the world - several times - and written the bestselling book, “Investment Biker.” (You can get his latest book, “Bull in China,” for free right now, courtesy of Money Morning.)

Below, please find Keith’s exclusive interview with Jim Rogers. We think you’ll find it profitable.

~ Alex Williams
Publisher, Investment U

Keith Fitz-Gerald: There’s a confluence of money flowing into and around China. Do you believe that the U.S., with all its current problems, will get left out?

Jim Rogers: Absolutely.

The U.S. dollar is a terribly flawed currency. I’m trying to get all of my money out of U.S. dollars. I don’t know why anybody would put money into the U.S. dollar, and by extension into the U.S., as we stand here today. The U.S. is probably the largest debtor nation the world has ever seen!

The United States’ foreign debts are increasing at the rate of $1 trillion U.S. dollars every 15 months. U.S. foreign debt is over $13 trillion, and rising rapidly. It’s the official policy of the central bank to debase the currency. They’re trying to drive down the value of the dollar.

Keith Fitz-Gerald: The government has succeeded wildly, so far.

Jim Rogers: You haven’t seen anything yet!

They’re trying to drive down the dollar. I’m trying to be patriotic. I’m trying to sell dollars. That’s what they want. I’m trying to help them drive down the value of the currency.

All Americans should. There are certainly good reasons to put some money in dollars. For instance, if you have to buy cotton, you have to have dollars.

But for the most part - I, anyway - am joining other people who’re trying to avoid the U.S. dollar, because Washington has sent a very clear signal: “We want the dollar to decline. We’re gonna do our best to make it decline.”

Well, everybody has to make their own decision. I’m trying to do what the Federal Reserve wants me to do, and I’m selling dollars.

Keith Fitz-Gerald: My take is that former Fed Chair Alan Greenspan and current Fed Chairman Ben S. Bernanke may go down as the worst central bank chairmen in history. Do you see it differently?

Jim Rogers: [Bernanke] and Greenspan together will probably bring [about] the end of the Federal Reserve. We’ve had two central banks in America that failed. This third central bank will probably fail, too, because of Bernanke and Greenspan.

The Federal Reserve last week put $200 billion more onto its balance sheet of mortgages. Now I don’t know how big they can expand their balance sheet, but if they keep doing it, there’s only so much - [and] they just bought Bear Stearns.

There’s just so much they can do. Maybe that balance sheet is infinite. I doubt it. And it can be said to be infinite; they just print money like Zimbabwe or someplace. But that has to come to an end, eventually.

Maybe Bernanke is going to get into his helicopter and fly around collecting rents now. Maybe when they repossess all the property, he’s going to be the rent collector. But then when they eventually take on all the car loans, I guess he’s going to be collecting car payments, too. And credit card debt, when they take over all the credit card payments, I guess he’ll be hauling us all out saying: “Your credit card’s overdue.”

This is insanity.

Keith Fitz-Gerald: Is there a circumstance under which you could see the U.S. recovering, or do you think this country is doomed to be an economic also-ran?

Jim Rogers: Historically, nations that have gotten themselves into this kind of situation have only gotten out following a crisis or a semi-crisis, or some gigantic stroke of luck.

The U.K. got out because they discovered the North Sea. Now you give me the largest oil field in the world, or one of the largest oil fields in the world, I’ll show you a good time, too.

So if you have a stroke of luck [you can escape these kinds of problems], but otherwise, nobody’s ever sorted out these problems without some kind of gigantic crisis or semi-crisis first.

In America, most people do not understand there is a problem! The few who know there’s something going on don’t understand what it is. Most of them who understand it actually think it’s good that the currency’s declining. America’s not going to do anything until things get very, very bad.

Others that offer the rejoinder to this - that the declining dollar makes America competitive - [that] has worked in the short term. But no country has ever restored itself by debasing its currency, not in the long term, not even the medium term.

Many places have tried to debase their currency as a solution. It’s never worked, other than maybe in the short term, for a while.

Keith Fitz-Gerald: Are we looking at a Japanese-style lost economic decade?

Jim Rogers: The Federal Reserve is making the same mistakes that the Japanese made. They’re trying to say: “We won’t let anybody fail. We’ll print a lot of money. We’ll drive interest rates to zero. And we don’t want anybody to fail. We’ll put on as many Band-Aids as we have to.”

Well, putting Band-Aids on a cancer patient is not a good solution.

So whether it’s like the ’90s in Japan, or the ’70s in America, remains to be seen.

[One-time U.S. Federal Reserve Chairman] Arthur Burns, who headed the central bank in the ’70s, did exactly what Bernanke’s doing. He raced in and printed money and said: “Oh, everything’s gonna be okay.”

But the economy never recovered, inflation went through the roof, and the dollar was under duress. Eventually they had to bring in Paul Volcker and interest rates went over 20%. And eventually they killed inflation and they solved the problem.

They’re making exactly the same mistakes that Burns made. For whatever reason, though, this problem is going to last longer than previous difficulties in America. And it’s probably going to be worse.

Because, now, America is a debtor nation. Now we’re the largest debtor nation in the world. At least in the ’70s, we were still a creditor nation. Japan could survive because they were the largest creditor in the world at the time. So they didn’t fall off the face of the earth.

America’s now the largest debtor the world has ever seen. What’s happening in the U.S. is not going to be fun.

Keith Fitz-Gerald: Should the Fed be stepping in like it has in recent months?

Jim Rogers: It’s outrageous that Bernanke’s sitting there. You know, I’ve read the Federal Reserve Act. Nowhere does it say [the central bank is] supposed to bail out investment banks! Nowhere does it say you should bail out Wall Street. Their mandate was to have a sound currency, and then it was later expanded to have employment - to help employment. But nowhere does it say: ‘Bail out investment banks.’

Investment banks have been failing for centuries. The world hasn’t come to an endâ€¦ even when investment banks have failed. They just caused a setback, and so what!

Recessions are usually good for the system. They clean out the excesses. And my God there’ve been excesses on Wall Street in the past 10 years. You don’t see a bunch of 29-year-old cotton farmers driving around in Maseratis and flying in private planes to exotic locations. Well, you see a lot of guys on Wall Street doing that.

And the idea that we’re now supposed to bail them out is ludicrous! I don’t see any of those guys sending their bonus checks back.

Huge amounts were made in the debt markets. We now know [that money was made] at least incorrectly, if not fraudulently, and yet, now we’re supposed to bail them out. It’s bad enough they get to keep their money. But the outrageous part is that it will cost more to try to prevent a recession than to have the recession.

We have safety nets in place, now. We did in the ’70s in America and the Japanese did in the ’90s. I think there’s good evidence that it will cost more to try to prevent the problems than to have the problems.

Keith Fitz-Gerald: That’s a very interesting thought that had not occurred to me before.

Jim Rogers: Well, we’ll see if it’s right. In nature, there’s the natural phenomenon of forest fires. The forest fires are pretty terrible when they’re going on. But nature invented them to clean out the forest so that the forest could then come and grow from a new, sound foundation. That’s what recessions do, too. They’re a natural phenomenon.

Nobody likes it when we have them any more than anybody likes a forest fire. But in the end, everybody’s better off. Bernanke thinks he can stop this; he’s going to very well destroy the system by trying to save it.

Keith Fitz-Gerald: Could you see a segment of the financial system surviving this? Or do you think that there will be such catastrophic change that we won’t recognize it until several years from now?

Jim Rogers: Ask me again in five years, 10 years. That was true after the ’30s, certainly. It was true even after the ’60s. Very few people went to Wall Street in the ’70s, very few. A whole generation ignored Wall Street in the ’30s and in the ’70s.

Will that happen again? Probably, because of things we’ve been discussing.

So there will be big changes, of course. If you’re in the field that deals with - and works out - bankruptcies, you’ve got a great future - on Wall Street, or in the legal profession. If you’re in commodities, you have a great future. Some sectors of the financial community are going to do well. Many others are going to disappear and/or do badly.

Keith Fitz-Gerald: How low could the dollar go?

Jim Rogers: I have no idea. You just have to watch it as it evolves. Politicians and bureaucrats can do unbelievably stupid things, and have [done so] throughout history.

They will usually do things that are so stupid nobody can believe them, but it happens. You have to watch and see as it goes.

Good investing,

Keith

Today’s Investment U Crib Sheet

Keith Fitz-Gerald, the Investment Director of the Money Map Report, is a seasoned market analyst known particularly for his accuracy. He is also a former professional trader and licensed CTA, advising institutions and qualified individuals. Keith also contributes to MoneyMorning.com - a free service that helps investors profit from the “seismic shift” in the global economy. Each day, you’ll get their actionable advice before the market opens. And if you sign up today, they’ll send you this special report: Nine Ways to Profit from the Diving Dollar. Just go here to get your free copy.
Bonus: Jim Rogers is “loading the boat” with a special group of China stocks right now. And, by special arrangement with Money Morning, you can get all of his “power play” picks for free today. Just go here to learn more about this special offer.