Fed pushing us to financial catastrophe worse than 2008 - billionaire investor
Since the crash of 2008, the world economy seemed to be slowly getting back on track. However, more and more voices - among our guests as well - are warning the public about a looming cataclysm in the financial world. How damaging will the new collapse be? What is leading the world into a global turmoil? And when the flames rise up, is there going to be anyone this time to pull the international community away from the brink of global war? We ask a legend in the world of investment, a co-founder of Quantum Fund - Jim Rogers is on Sophie&Co today.
Sophie Shevardnadze: Jim Rogers, a legendary man in the world of investment and trading, co-founder of the Quantum Fund - welcome to the show, it's really great to have you with us!
Jim Rogers: I am delighted to be here, Sophie.
SS: Welcome to Moscow. Alright, Jim, so "a mess for both American and world economy" - that's what you predicted. What it is going to be like? Is it going to be just as bad as 2008?
JR: No, Sophie, it's going to be much worse: you should watch RTTV, it would be much worse.
SS: Tell me.
JR: We had a problem in 2008, because the debt was very-very high. Now the debt is much-much higher, all over the world. Next time we have a problem, it's going to be worse than 2008. You should be very worried, you should be very knowledgeable, and you should get prepared.
SS: I am not as knowledgeable as you are in questions of economy and finances - so tell me, how bad are we talking about? I mean, you've been talking about this impending recession for a while now, ready to strike the U.S., for instance, but, you know, we see American economy picking up, the unemployment rate is going down, so - why does it keep postponing itself?
JR: Wait, wait. First of all, you are listening to government figures. You remember the Soviet Union, the government had a lot of numbers, they were very good. The U.S. now puts out a lot of figures that are not legitimate, accurate figures. Look at unemployment, what do they do? For instance, they just stopped counting many people, said they're not looking for a job anymore - so the numbers are artificial in the U.S. Yes, some parts of the U.S. economy are doing very well. If you're on Wall St. or if you're in finance, you're doing fine, because the government has been printing a lot of money and a lot of debt has been put out. But you go to Texas, go to the MidWest - they're not doing well at all. Most of the country is not doing well.
SS: Alright, but give me something concrete - when do we have to expect this crisis to hit and what's going to cause that meltdown?
JR: Sophie, for the last 18 months in the U.S., most stocks have been going down. The average is a fraud, because of the few big companies that make the average go up and that's because the government, the Fed Reserve, Central Bank is printing a lot of money. Stocks are going down in the U.S., most stock are down. So, the signs are already there. Now, unfortunately, they're not visible, they don't make headlines, so it's already happening. Parts of the country are in recession, stock market, most stocks are going down - it's already happening.
SS: So, if you look at the efforts of the world's financial planners and central bankers, I mean, their efforts to invigorate the economy aren't really working - what is working? What could work without the government interference?
JR: Without government interference, wouldn't that be wonderful. If we might, we probably would've been finished with the problems of 2008 or not, but most Americans will tell you that the economy is not better now. Their lives are not better than they were in 2008, or even 2005. Most Americans do not have a better life for a long-long time. If you ask me what to do, first of all you should abolish the Federal Reserve. Now, Americans had three Central Banks in our history, the first two disappeared... You can get along without a Central Bank as we have. This Central Bank is a disaster, they've been printing a lot of money, they've been running up a staggering amounts of debt. So, the first thing that we need to do is to abolish the CB, which is unlikely, or, tell them to stay out of the way, tell them to stop printing money, tell them to stop building up the debt. That's the problem in the U.S. Sophie, the U.S. is the largest debtor nation in the history of the world. Not the largest in the world, the largest in history of the world - and the debt is getting worse. This is not a good situation!
SS: So, you're thinking abolishing the CB is going to improve the situation on the market?
JR: This particular CB. Now, the world without Central Banks has problems too, but this CB is making all of our lives much worse, and the next crisis, and the one after that, if we survive the next one - it's going to be really, really bad. And, what you asked before, "what that means?" - that means bankruptcies, that means currency turmoil, that means stock markets dropping a whole lot, that means interest rates going much higher - it won't be fun.
SS: I just wonder, how many crises you have seen in your lifetime? I mean, are they all the same, you always get bankrupt and you always...
JR: But, America was a creditor nation in my lifetime. When I was a kid, America was a creditor nation. Since 1987, America has become a debtor nation, and now, in 30 years, we've become the largest debtor nation in the history of the world.
SS: So are crises getting worse and worse as your life progresses?
JR: Yes, yes. That's because of me, I guess I'm getting older and causing the problems!
SS: So you also said that, "when economic trouble arrives, it inevitably leads to war." Now, we see some major world powers, and they are all in the economic crisis. Are we doomed to see war happened?
JR: Yeah, watch RT, don't you see what is happening?
SS: What kind of war do you see? I mean, world today is very different from world 20 years ago or 50 years ago. So, what kind of war do you see?
JR: I certainly hope we won't see World War Three. We certainly hope. Unfortunately, for whatever reason, mankind throughout history is always coming up with big wars. Let's hope it continues to be proxy wars - I mean, you know about Afghanistan, you know what's been going on in the world, you know what America did in Ukraine...
SS: But this have been going on forever, it's not a new thing. I mean, countries change, locations change, but the logistics don't change.
JR: The reason these things are going on is because economic hard times are around the world. Japan is in recession, Japan is one of the largest economies in the world. The Japanese government will tell you they're in recession. Several European countries are in recession. We have hard times in many parts of teh world, and that's one of the reasons we're having strife. The whole Middle East.. In the last ten years, nearly every country - probably every country - has had some major crises. This is all because the world economy is bad and debt is building up!
SS: We keep also hearing about a major crisis in China. But their growth still stands at 7%, which is pretty impressive. Should we really be worried?
JR: I don't hear about a major crisis in China. China's in better shape than most countries these days. It does not mean China's not going to have problems.
SS: Just to say, that some people like to blame China's slowdown on world's economic problems. Is it fair?
JR: I know! And they're trying to blame Russia on Ukraine. You know, some people try to do all sorts of things, you know.
SS: They do.
JR: It's absurd, and some people listen to some of these... propaganda is unbelievable all over the world. China trades with most of the world. Japan's in recession, it's one of their major customers; if your major customer is in recession, you're going to suffer too. Korea's one of them, Korea is having problems, many parts of Europe are having problems. So, when your customers have problems, of course you have problems. You can't blame it on China, China is the victim. But it doesn't matter. We are all in it together, Sophie, and we all are suffering and we all going to suffer more in the future.
SS: But, I'm thinking, back in 2008, China was in a really, really good shape. It was doing the heavy lifting when the crisis hit the world. Who's going to do heavy lifting this time around when the crisis comes?
JR: What happened in 2008: China didn't have much debt. They had a lot of money saved up for a rainy day, and when it started to rain, they started spending money. This time, Sophie, China has a lot of debt itself. It's astonishing that China has built up so much debt in just the last 8 years. So, China is not going to be able to help as much this time as they did last time. Who's going to have to do the heavy lifting?
SS: You tell me.
JR: I told you - be worried and be prepared. There's nobody left. The Central Banks are going to print as much as they can, the governments in the U.S. and other places are going to spend as much as they can, but eventually, the Market's going to say: "we don't want your garbage anymore, you're printing all this paper money, you are putting out all these bonds - no! No! We're not going to take it anymore".
SS: I remember last year, President Obama said that U.S. should be writing the rules of the global economy and not China. First of all, are there any rules in global economy? And, who's really to take the lead, if not China? Can America do the heavy lifting?
JR: America will, for the most part, because many people think that America still is the dominant economy, it is the largest economy in the world.
SS: So, it is - objectively speaking, still, right?
JR: It's the largest economy in the world right now - but it's also the largest debtor nation in the world, and most of the growth in the past few years has been based on debt. Sophie, you give me a trillion dollars, I'll give you a very good time. You and me will have so much fun, if you give me a few trillion dollars. But the hangover, the headache is going to be so horrible, because somebody has to pay for this, and America's debt is going through the roof. So, yes, America's leading the world economy, but it's all based on printed money and borrowed money. In the end, it's going to be a disaster for all of us.
SS: So, obviously, when the crisis hit, people tend to look for safe havens, and a lot of people still think that "safe haven" is the dollar: they like to save their money in dollars, not in euros, not in yens or roubles - in dollars. You don't think so? Why not?
JR: I actually own a lot of U.S. dollars, just because of what you've said. Because everybody thinks that the U.S. dollar is a "safe haven". It's not, America's the largest debtor in the world history, but people think it's still a safe haven and they want to...they're not going to buy euro as you said, they're not going to buy the rouble, they're not going to buy other currencies in the world, so they're going to flee to the U.S. dollar. My largest currency possession is the U.S. dollar.
SS: So what do you need them for? You're just going to sell them when the times are better?
JR: That's my plan, I hope I got it right. You know, then we're going to have a really good time if the dollar goes up, like I think it will, hopefully I'll be smart enough to sell my U.S. dollars, as it gets overpriced, could even turn into a bubble, and then I got to do something with my money.
SS: When do you think that'll happen?
JR: Later this year, next year.
SS: Oh, so it's, like, a close perspective.
JR: Yes, it's 2016. I told you to be worried! Get prepared! And by the way, I just want you to know, speaking of currencies. A week before that, I bought Russian government bonds in roubles.
SS: Wait, wait, we will get to the Russian bonds, but first - we see foreign governments, actually dumping U.S. debt at a record rate. Why do we see this diminished appetite from overseas? Do they just need the cash?
JR: Sophie, I'm not the only person who knows that the U.S. is the largest debtor in history, and debt is going higher and higher. Other countries see it, but many other need the money - Russia needs money these days, you know, China's trying to cut down its dependence on the U.S.. China's entire foreign currency reserves...
SS: I was going to say - China and Japan - I mean, they own trillions in American Treasury, even Russia has increased its investment in the U.S. debt. Do they not sense the trouble? Do they not see that it's the biggest...
JR: ..Debtor nation in the history of the world? Well, the Japanese need money, they're in recession. Many countries need money, but the holdings of the U.S. government debt is declining, you're right. More and more governments, for whatever reason, are reducing their holdings of U.S. government debt - and they're wise.
SS: So, U.S. dollar is slowly forfeiting its position, right? Could something else take its place? What could it be?
JR: We need something to compete with the U.S., because it is a terribly flawed currency. Now, you look around the world and there's nothing on the horizon, except, possibly, the renminbi. Renminbi is a huge economy, it's not a huge debtor like many other countries, so the renminbi is the only one I can see. Now, the renminbi is not convertible, so it's an absurd statement, but, it is becoming more and more convertible, more and more freely tradeable, and as that happens, it's the only currency that I can see that will replace the U.S. dollar or begin to compete with the U.S. dollar. It takes a lot of time to get rid of old currencies.
SS: Right now, as we speak, what is safe in terms of commodities? Is gold safe, for instance?
JR: I own gold, I hope I still have it here, yeah, I have gold.
SS: Can I have it?
JR: You can look at it - just a proof to you that I have gold. I even have some Russian gold in here.
SS: Nice coins.
JR: There it is, Russian gold. So, I own some gold, but I am not buying gold now, I haven't bought gold in a while, I expect a better chance to buy gold, sometime in the next year or two, if the dollar goes up, gold may go down. But, if it goes down, I hope to buy a lot more gold, because eventually gold is going to go through the roof. As this turmoil increases and people lose more and more confidence in governments, more and more confidence in paper money, they're going to look for something, and gold and silver will be a couple of those places. If you're looking for something right now - agriculture.
SS: Wait, you believe that the future is in agriculture, that farmers are the billionaires of the future - but why farming? I mean, it does seem like it's a step back in history, no, rather than the other way around?
SS: Just like going back to gold, or going back to typewriters, because everything is wired, and the only safe way is to typewrite things.
JR: Do you know how to drive a tractor?
SS: No, I don't. I don't even have a driving license.
JR: Really? Not even a car?
JR: Oh my Gosh, I don't know if I ever met anybody...
SS: I'm the old-fashioned type. So tell, why farmers, why are they the future billionaires?
JR: For many periods of history, we had moments when farmers, when the agriculture people were on top, followed by people on the financial types, and others were on top, going back to the farmers - people who produce real goods. This has been going on for thousands of years. All these cycles come and go. Now, agriculture has been a horrible business for 30 years, the average age of farmers in America is 59. In Japan, it's 66. In Canada, it's oldest in recorded history. The highest rate of suicide in the UK is in agriculture. Millions of Indian farmers go... This is a terrible business! Horrible business and it has been for over 30 years. More people in America study public relations than study agriculture.
SS: So where is the future in agriculture?
JR: You're supposed to buy low. Didn't your parents teach you to buy low and sell high? Agriculture is the disaster. Now, either it's going to get better or we're not going to have any clothes or any food at any price. The turn is coming. Agriculture in Russia, for instance, right now, is becoming very-very exciting, very-very profitable, you should go out and learn how to drive a tractor! I'm telling.
SS: I might, after this interview. I don't want to be left without clothes.
JR: And where we're going to get our vodka?
SS: I know.
JR: I mean, for goodness' sake!
SS: I'm going to go and learn how to drive a tractor after this, I promise. Alright, tell me in broader terms, where should be people looking to invest geographically, whether it's agriculture or business, or finances?
JR: I have sold short the U.S. stocks and I have sold junk bonds, low-grade bonds, in the U.S., I own shares in China, I have shares in Russia, I bought Russian government bonds, several days ago. These are places that I am looking at, I am looking at Kazakhstan as a place to invest, Iran I'm looking at, Nigeria I am looking at.
SS: Tell me about Iran, because, you know, it's out of the international isolation, it's a huge untapped market...
JR: Yes, very young - something like 2/3 of people are under 35 years old, it's a very young country with lots of people, over 70 million people.
SS: Where exactly they should be investing in Iran, in what fields?
JR: You can invest in oil if you want to, but...
SS: That's obvious.
JR: If you invest in Iran oil, you're investing in oil whether you want it or not. Anything - they've been under sanctions for a long time, they want everything. Tablecloth, soap - whatever you know about, you go to Iran and invest in those things, or buy shares on Iranian stock market. It's still difficult for me, as an American, so you should go there, before the Americans get there. It's wonderful for you, you're Russian...
SS: I couldn't beat them in Cuba, and now it's too late...
JR: You don't have to compete with the Americans in Iran.
SS: But talk to me about Russia - you keep saying that you like invest here, but the rouble is losing its value and the general opinion is that it's not a good place to invest. Why is it good to invest in Russia right now?
JR: The Russian stock market is the most hated stock market in the world.
SS: Not only the stock market, Jim.
JR: What else, the country, the women? What are you talking about! Anyway, I like to invest in unpopular places, unpopular stock markets. I have learned in my career, that if you invest in things which everybody dislikes, you're probably going to be very well off 2, 3, 5 years later. I can remember just about every country which has been very depressed at times, if you buy - it turns around.
SS: So you expect the rouble to rebound?
JR: It already has started rebounding. It's rebounded, I except that the rouble will not go down. The rouble is in a process of making a bottom. Oil is in the process of making to bottom, therefore the rouble, but - Russia now has things which are replacing oil, agriculture is booming in Russia now, for many reasons, some artificial but some real. So there are other things that are going to replace oil in the future.
SS: So, yeah, about oil - you've said in January that oil prices haven't hit the rock bottom yet, but now they're rising. Should we expect them fall again?
JR: The prices did go down dramatically after I said that, and it did hit a bottom. What normally happens, Sophie, is things go down, we had a big drop, it hits a bottom - and then, what we call in America a "dead cat bounce" - it bounces right there.
SS: So what's going to happen not?
JR: You had the "dead cat bounce", and then it goes back, it tests the lows, and then it's the end - it's at the end of the big collapse and then it starts going up again. That's what's going to happen.
SS: So where we are right now? We are at the first hike?
JR: We had the dead cat bounce...
JR: We're probably going to have some correction, it may go higher, but it probably will go lower for a while, feel around, test the bottom, that will be the bottom, and then 2 or 3 years from that it will be higher again.
SS: So the rebound is in 2-3 years.
JR: Maybe sooner, probably this year or next.
SS: But I'm thinking, cheap oil...
JR: I wanted to tell you one thing, Sophie - I'm the world's worst market timer. I'm the world's worst short-term trader, so I don't know. You watch RT and you can find out the exact timing of these things, I am terrible at it.
SS: Okay, you're just like a good clairvoyant, because when they predict the future, they say right away - "We're good but we can't see the time".
JR: I didn't know that's what they've said.
SS: That's what they say.
JR: That's what they say? Well, okay.
SS: So, back to the oil, I'm thinking, cheap oil is actually good for a global economy, no? Isn't cheap energy a driving factor for growth in giant countries like China or India?
JR: It's absolutely, and more people then consume energy, then produce energy, there's no question about that, it's better for all of us. But, in the meantime, many people are suffering - Russia, Nigeria - many people are suffering with lower energy prices, but overall, the world is better off with low-energy prices.
SS: So, what do you think is in store for the emerging economies like Brazil, India?
JR: There are many-many emerging economies, so there's no generalization.
SS: Who do you think will take the lead?
JR: Coming out of this?
SS: China isn't quite an emerging economy. I am talking about the emerging big economies.
JR: First of all, China is the next great country in the world. The XIX century was the century of the UK, the XXth century was the century of the U.S., the XXI century is what's going to be the century of China. So, you have children?
SS: Will have soon...
JR: Okay. Horosho. Then be sure, your children learn mandarin, because it's going to be an extremely important language in their lifetime. I have two girls, both speak perfect mandarin, because I am preparing them or the XXI century. Now, you say it's not an emerging market - okay.
SS: I mean, not anymore..
JR: Okay, that doesn't matter. Let's see... Conceivably, Russia, certianly not Brazil. Kazakhstan - amazing changes, positive changes are taking place in Kazakhstan. Amazing, positive things are happening in Nigeria. Not Brazil.
JR: If you're going to visit only one country in your lifetime, Sophie, go to India. But, it's not a good place to invest. Not with my money anyway. It's got the world's worst bureaucracy - many reason.
SS: Worse than in Russia?
JR: Yeah, the Indians learned bureaucracy from the English, and then they took it to a higher plane.
SS: Took it to the whole new level, huh.
JR: The whole new level, it's astonishing what the Indians can do. I mean, Russian bureaucracy is a nightmare, there's no question about that. You should have been here when there were Soviets - oh my God, was it a nightmare! It's getting better, but it's still bad, you're right.
SS: I want to talk a bit about the upcoming elections - Donald Trump is doing so impressively well, who would have thought? He may even get the Republican nomination, and who knows, he may even make it to the White House!
JR: He might win, yes.
SS: So it will be the first time we'll have a businessman at the helm of a state. Do you think that will change anything? Having a businessman being a President?
JR: If Donald Trump does what he says he's going to do, we're going to have trade wars with lots of people, such as China, such as Mexico, probably Russia, who knows - and trade wars have always led to bankruptcy and, often, led to war. So, if mr. Trump does what he says he's going to do - I've told you to be worried. If mr. Trump wins and does what he says, you'd better be panicked, because the world is really going to fall apart. It is an absolute disaster, the worst might happen and we might have big wars at that point. Now, one thing about it, Sophie - you have job security, because journalists have to report it, somebody has to report to us what's going on and if this is all very bad, which will happen if he does what he says, it's going to be really, it's going to be a terrible world. I worry about my little girls in that world.
SS: I'll make sure to report on it. Well, Jim, thank you so much for this delightful interview, it's been a great pleasure having you with us here, in Moscow, in our studious, hopefully we will see you soon. We were talking to Jim Rogers, one of the most famous names in the world of trading and investment. We were discussing where the world economy is heading and where we should be investing our money. That's it for this edition of Sophie&Co, I will see you next time.