Transcript of interview:
Lou Basenese: Thanks for taking the time to speak with us. First question I have concerns gold. You’re on the record right now with Business Insider saying it would be normal for the price of gold to come down to $1,200 or $1,300 an ounce. Is there any reason, fundamentally, that you think it could go lower than that?
Jim Rogers: The fundamental reason could be the market. Markets usually go too far on the upside and too far on the downside. If you start having people getting margin calls or getting scared and getting hurt, then yes, it could continue to go down. But I don’t know if you would call that fundamentals or market. But there is a lot of gold out there that people have bought in the past decade, and some of that could come to the market as people get scared.
LB: Is this a likely event? If we have a big position in gold, is it worthwhile hedging some of that on the possibility?
JR: I hedged some earlier. Unfortunately I didn’t stay with it long enough. I closed them very quickly. I don’t know. Asking me about market timing is a waste of your time. I’m the world’s worst market timer. I’m the world’s worst trader, so I don’t know. I’ll have to leave that to other people.
LB: What’s your opinion on the U.S. housing market? Do you think it’s a legitimate recovery? Or do you think it’s just another bubble forming based upon runaway money printing by the Fed?
JR: I’d hardly call it a bubble yet. It’s recovering, but it’s recovering for artificial reasons. Yes, they’re pumping huge amounts of money into the market, not just in the U.S., but all around the world. And that money’s sloshing around. So we do have an artificial recovery. I mean, you give me a trillion dollars and I’ll show you a very good time. Some people are having a good time right now. But it is definitely artificial.
LB: Is it worth trying to benefit from the upside, or do you think it’s just too risky to even try and time when the Fed will shut the floodgates with the stimulus?
JR: I’m not smart enough to know. They’re not smart enough to know. They just react to events, unfortunately, as we’ve seen over the past few decades. I mean, the last decent central banker in the U.S. was Volcker, and he’s been gone for 26 years now. So they’re just going to react and they’re going to make mistakes, more mistakes. Look at Bernanke’s record. Since Bernanke has been in Washington, he has never been right about anything. So I assure you, whatever they do, it’s going to be the wrong thing.
LB: Do you think there’s anything that Bernanke could do to take the U.S. government and the economy out of the tailspin that it seems to be on?
JR: He could abolish the Federal Reserve and resign. America has had three central banks. The first two disappeared and this one is going to disappear, too. Between Greenspan and Bernanke, they keep making so many mistakes that this one is going to disappear, too. No, of course he’s not going to resign, although he should if he had good sense. A world without central banks has problems, but a world with this central bank and these central banks has worse problems. They’re printing staggering amounts of money, putting huge amounts of debt on their balance sheet. These central banks these days are not like central banks of old when they did what they’re supposed to. This is the worst.
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LB: In your book, Street Smarts, you talk about historical patterns and similar traps that governments, like the British Empire, fall into. They overreach. They spend too much. They tack on too much debt. America, like you said, certainly falls into this category. Do you think that there’s any likelihood that the U.S. can avoid a full-blown collapse? Do you see that eventually happening? Is America just doomed?
JR: America is the largest debtor nation in the history of the world, and it’s getting worse at the rate of a trillion dollars a year or so. No, there’s no way America can pay off its debt. It’s going to default, one way or another. There’s more than one way to default. You can pay everybody back, but you can pay them back in worthless money. It’s just impossible for America to pay its debt, and eventually the market is just going to stop putting up with us. It’s happened to every great country in the world. They overextend. They overreach and then they run into problems. And it’s going to happen to us, too.
LB: Worst case scenario… What do you think will happen? How can an individual investor prepare for it or protect against it, aside from leaving the country perhaps?
JR: You don’t necessarily have to leave the country. Everybody has to make their own decisions. I can’t make the decision for anybody. But the best thing is to invest in what you know. Everybody has expertise in something. Some people know a lot about wheat. Some people know a lot about shoes. Some people know a lot about something. The best thing to do is to figure out what you know best, and focus your efforts there. Don’t listen to somebody on the radio or the internet, because you got to stay with what you know, not with what other people know. That’s the way you’re going to survive all this. People will thrive as long as they pursue their own expertise, their own field of knowledge.
LB: Is it inevitable that the dollar will lose its place as the world’s reserve currency, and if so, how soon do you think that could happen?
JR: America’s debts are going through the roof at a rapid rate, so of course it’s going to happen. You can’t name any currency which has survived forever, and the U.S. dollar will go the same way that every other world currency has gone, or every other medium of exchange has gone.
LB: Do you see it happening potentially in the next three to five years with the news that China and Australia are going to look to do direct exchange?
JR: The Chinese are already doing direct trade with most of their neighbors, in fact. Everybody who’s in the area now does direct currency transactions with the Chinese. So it’s happening. I don’t know how long it will take; all I can do is watch what’s happening in the world. I see in America that fewer and fewer people are using the U.S. dollar, and more and more people are looking for alternatives. I don’t like saying it – given that I’m an American, a tax payer and a voter, I don’t like it at all. But one has to deal with facts, not with one’s wishes.