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Transcription of Finance News Network interview with American investor and author, Jim Rogers.

Lelde Smits: Hello I’m Lelde Smits for Australia’s Finance News Network and joining me today from Singapore is American investor and author, Jim Rogers. Jim, welcome to FNN and thanks so much for your time. Now for the benefit of our Australian audience, why did you choose to leave your homeland and set up in Singapore?

Jim Rogers: The main reason Lelde is that I’ve got two children who I want to grow up speaking perfect Mandarin. In my view the 21^stcentury will be the century of China. I couldn’t keep up the Mandarin in New York, as much as I wanted to. You know, many parents do strange things for their children, they move near football coaches or music teachers or good schools. We moved to Singapore to maintain the Mandarin.

Lelde Smits: And why Singapore when you had all of Asia to choose from?

Jim Rogers: We looked at the Chinese speaking cities in China but the problem was the ones where we wanted to live are too polluted. I love Shanghai, I love Hong Kong, but the pollution is just too horrible. Singapore is the best of all worlds.

Lelde Smits: Well you’re clearly an investor with your eyes on global horizons, but what’s your outlook for global growth stepping into next year?

Jim Rogers: Well Lelde, I’m not too optimistic about what’s going to be happening in the world in the next two or three years, and maybe even longer. We have serious problems in the United States. You know, in 2002 we had an economic slowdown, 2008 was even worse because the debt was so much higher. The next time around the debt is going to be staggeringly higher. So, the problems are going to continue to get worse until somebody solves the basic underlying problem of too much spending and too much debt.

Lelde Smits: Could you elaborate on that Jim; If you believe problems are going to get worse because of too much spending and debt, what do you believe is the biggest risk to global growth in 2012?

Jim Rogers: Well definitely too much debt is, in a nutshell yes - I mean the biggest risk of course is the Central Bank in the US which keeps printing money. But they’re printing all that money as a result of the debt. So we have big problems of money printing, debt, too much consumption – be careful.

Lelde Smits: You recently returned from the States, how are folks there feeling about the economy?

Jim Rogers: I was surprised at how much optimism there is. Everybody still seems to think everything is still going to be OK. I guess they’ve been thinking that we’ve all been brought up that everything would be OK in next year or two, and it has been OK for the past 20 or 30 years. Unfortunately I think that’s false optimism and I would have been more impressed if I’d seen a lot of depressed people, but I see optimistic people.

Lelde Smits: So if everyone is optimistic, what concerns you about that state of American’s fiscal affairs?

Jim Rogers: Well the Central Bank, I mean the Central Bank controls monetary affairs but the Central Bank keeps buying government debt and the Congress keeps spending government money. So the combination of the Federal Government including the Central Bank, really scare me.

Lelde Smits: But if the Central Bank isn’t fixing things, who is responsible for fixing this dilemma?

Jim Rogers: Well first of all, you could either abolish the Central Bank or put somebody in there who wouldn’t print money, or the Congress could just stop spending money. Unfortunately Lelde that’s not the way politicians work. They just worry about the next election, they want to get through the next election and they hope they can make everything all right until after the next election. So it’s Congress in the end, it’s the President in the end, but are they going to do something – no. They’re not going to do anything until there’s a serious crisis or semi-crisis.

Lelde Smits: Well what’s holding them back then if we have the threat of an imminent crisis, as you say?

Jim Rogers: It would horribly painful to do what’s necessary. The problem Lelde is that the measures that America needs and not just America, many countries but especially America needs, would cause huge pain for a while. But, Lelde, if we don’t take our pain now and we wait until the market forces the pain on us, then it’s going to be you know a systemic collapse.

It’s going to be very, very serious pain; you’re going to see riots in the street. You’re going to see serious, serious problems, maybe perhaps war even. It’s better to go ahead and take the pain now, while it would be terrible for two or three or four years, at least we’d get it behind us and start over.

Lelde Smits: OK, so we need to take the pain and we all know the way out of debt isn’t more debt. So what’s printing money going to fix and why is this even an option?

Jim Rogers: Printing money does nothing more than bide time. Throughout history governments have tried to debase their currency in the hope that they would somehow get better down the road, but it’s always gotten out of control. The debt has gotten higher, the money printing makes people feel better for a while but in the end its higher inflation, higher interest rates and then you have serious, serious problems.
Once inflation starts rising and gets out of control, it’s very hard to kill it. At this time we can still solve our problems, if you wait until inflation’s out of control then it’s very hard to solve your problems.

Lelde Smits: Turning to US politics now, and the US elections are coming up in November next year. Who are you endorsing Jim and why?

Jim Rogers: Well I don’t even want to get into who I’m endorsing and why because I mean after all, I’m just one voter and I would probably hurt somebody if I endorsed them. I mean in America, Gary Johnson and Ron Paul seem to understand the problems that are facing America. But I’m not in the business of endorsing political candidates - as far as I’m concerned Lelde, a pox on both of their houses.

Lelde Smits: Well if you won’t endorse a person, which policies do you favour?

Jim Rogers: Well, the only thing we can do is to cut spending with an axe - not with an axe, with a chainsaw. I mean we’ve got troops at over 100 countries around the world doing nothing but – the troops aren’t making enemies, but the presence of the American Military is making enemies. We’ve got to cut spending dramatically, we’ve got welfare programs; we’ve got entitlement programs in America that are just mind boggling. We really just have to take a chainsaw to spending of everything, across the board.

Lelde Smits: Obama just pulled troops out of Iraq, isn’t that a step in the right direction?

Jim Rogers: He pulled out most of the troops from Iraq; you know as usual, government propaganda is exactly that – government propaganda. There’re still a lot of contract people there that they’ve kept in Iraq, but yes that’s a step in the right direction. But again, we’ve had troops all over the world; it’s not doing us much good.

Lelde Smits: But Jim, can the budget be balanced by spending cuts alone. Shouldn’t policy makers also be looking at raising taxes?

Jim Rogers: Raising taxes doesn’t do any good Lelde, governments don’t create jobs. I mean have you ever seen a government create a new job? It’s people like your company that creates jobs. That’s the private sector where you create jobs. Taking money from the people who save and invest, and giving it to a bureaucrat, it’s going to give the bureaucrat a job and it’s going to give a few people jobs, but that’s not the way you solve the problems.

Lelde Smits: But as you mentioned Jim, even if we get new leaders, they’ll still be dealing with the same old debt situation. How confident are you that the US can even eventually get this debt situation under control?

Jim Rogers: Lelde, I’m not confident at all, I have absolutely no confidence at all that anything’s going to be done, even if somebody were elected. As I say, I think that the problems are so deep that when he started doing the right things, there would be staggering cries of pain and anguish. And then everybody would give up and try to go back to the old way. The only way it’s going to be solved Lelde, is a crisis or semi-crisis.

Lelde Smits: OK let’s turn to Europe now, European affairs certainly haven’t left the headlines and continue to move markets. How effectively do you think EU leaders have addressed the region’s debt?

Jim Rogers: They’re not solving the problem either. At least they’re better than the US, they’re not printing so much money as we are in the US, at least they understand the problem they’re trying to cut the spending. But Lelde, if you look at the plan for any country in Europe, you’ll see they’re all going to have higher debt next year and higher and higher the year after that. Nobody in Europe yet is taking a chainsaw to their problems.

Lelde Smits: Now I know you are not the biggest fan of ratings agencies, but we have just seen a series of warnings and downgrades. So if Germany and France do lose their top-notch credit rating, how will the bailout funds be supported?

Jim Rogers: The solution to too much debt is not more debt, not more spending. The solution is to cut spending dramatically. All these countries should lose their credit ratings. It’s astonishing to me where these credit rating agencies have been? I mean we know that they’ve been basically wrong for 15 or 20 years about just about everything they’ve done. Lelde, please don’t pay – well you’ve got to because you’re a journalist, but I don’t pay any attention to those guys.  I know they don’t know what they’re doing, why bother?

Lelde Smits: While on mornings Jim, the International Monetary Fund’s chief just said that the world faces a 1930s style Depression. Would you agree?

Jim Rogers: Of course, where’s she been? I mean, what’s wrong with her? Doesn’t she watch FNN? I mean for goodness sakes, if she could just know what’s going on in the world around her, she would have known that long before December of 2011.

Lelde Smits: So do you believe the eurozone and Euro currency can and will continue in its current form?

Jim Rogers: Well, that’s a very good question. I own the Euro; I’m having serious questions in my own head of what to do about the Euro. I don’t know - it certainly won’t continue in its current form in 10 years, maybe six or eight years. No, no that’s going to change dramatically. It conceivably can come out of all this stronger if they do the right things down the road. I own the Euro, I’m very worried about the Euro. I know there are going to be changes in Europe and in the Euro, but when and how, I just don’t know right now, but I do own it at the moment.

Lelde Smits: And how are we likely to see those developments play out on global markets?

Jim Rogers: Oh we’ve lost one decade in the West, as you probably know. I mean the American stock market is below where it was 10 or 12 years ago. So we’ve already lost one decade in the economy and in the markets, likewise in Europe. We’re gonna lose at least one more decade, maybe two or three. The Japanese have lost two decades so far, you know, the Japanese stock market is down 80 per cent, that’s 8-0 per cent from where it was 21 years ago. You have the same problems in the West; this is a long running festering problem until somebody faces reality.

Lelde Smits: Now as an investor based in Asia, how well do you believe the region will weather the economic storms brewing in the US and Europe?

Jim Rogers: Well, I’d rather be – I’ve moved to Asia, you know, here I am.

Lelde Smits: So you voted with your feet?

Jim Rogers: Yes I’ve voted with my feet. I’m just up the road from you , just up the airline from you, as you know. We’re here, this is where the future is, my children speak perfect Mandarin like natives. Their future is in Asia; therefore my future is in Asia. Asia’s going to suffer, don’t get me wrong. When the largest two economies in the world Europe and the US have problems, everybody’s going to suffer. Asia will suffer less than the developed world. 

Lelde Smits: You say Asia will suffer, do you see signs this suffering has already begun?

Jim Rogers: Oh of course it has. If you look at China, China’s already got problems they have inflation. They’re doing their best to calm things down in China, wisely in my view, and then China’s been hit of course with the slowdown in America and Europe. So no, everybody in Asia is slowing down.

Lelde Smits: And what about Chinese property prices. The latest government data from 70 Chinese cities shows the average price of Chinese property has fallen for the second straight month. Do you believe Chinese property is in a bubble and are we witnessing the bust?

Jim Rogers: Some parts of the Chinese real estate market have been in a bubble. Certainly urban coastal real estate in China was in a bubble - that bubble has popped. How far down it has to go, I don’t have a clue. Probably a lot further because usually when bubbles pop, a lot of people get hurt. But it’s not like in the US where in the US, people are buying four or five houses with no job, no down-payment. You know, and then the banks were taking the mortgages and jigging them up even more. China didn’t have that kind of problem. You’re going to see real estate developers go bankrupt in China - no question about that. But it’s not going to be the end of the Chinese economy as it was in the US, the UK, Spain and a few other places.

Lelde Smits: OK Jim, so we’ve spoken about US and European debt, and a potential Chinese slowdown. How do you see global markets reacting in 2012?

Jim Rogers: Well I’m not optimistic for the most part about stock markets. I don’t own many stocks anywhere in the world. The only offset of the caveat for me is the fact that there is an election in the US, in Spain – sorry in France, a few other places. So whenever there are elections coming governments spend, spend, spend they throw money out the window to buy votes. So some people are going to be much better off in 2012. Is it enough to offset the world’s problems? I don’t think so, except in some sectors which will benefit.

So for myself, I’m short stocks around the world, I’m short American technology stocks, I’m short emerging market stocks and I’m short European stocks.

Lelde Smits: And what else are you buying Jim and why?

Jim Rogers: Well I own commodities, because if the world economy gets better Lelde, then commodities will do well because of the shortages. The lucky countries will continue to be lucky for a while. I own some currencies, which I mentioned, I’m worried about currency markets. I’m short stocks. I mentioned the things I’m short. So I anticipate problems in stock markets. If the world economy doesn’t get better, you’re not going to make money in stocks. But then central banks will print more money and when they print money Lelde, the thing to do is to own real assets.

Lelde Smits: Jim Rogers thanks so much for your insights. We’ll leave it there for now, and next take a closer look at your investments for 2012.

Ends

Jim Rogers 2012 Investments – Pt II will be released in early January 2012.