Speaking with the Wall Street Journal on Friday, commodities trader Jim Rogers of Rogers Holdings said riots such as the ones witnessed in Greece and reported as widespread in China will hit the United States and again in Europe as the next leg down in the financial crisis takes shape (after the election, he speculates in previous interviews).
“I’m more worried about those kind of problems [rioting] in the U.S. and Europe; this is where social unrest is going to be worse,” Rogers told the Journal. “I would suspect that, when economic conditions get worse here and get worse in Europe, we’re going to see . . . you’ve seen governments fail in Europe; you’ve seen countries fail in Europe. I suspect you’re going to see more of it [rioting], yes.
“We saw it in London; we’ve seen it in several countries in Europe in the last year or two. Yes, I expect to see it here, too. If you don’t, look out your window”
When asked about Bernanke’s credibility regarding his latest FOMC public statement, in which he said the Fed will be able to contain inflation, Rogers became noticeably irritated.
“Mr. Bernanke has zero credibility as far as I’m concerned. The Federal Reserve has zero credibility,” Rogers said forcefully. “Simon, go back at everything Mr. Bernanke has said in the last seven or eight years he’s been in Washington. He’s never been right about anything. The man has zero credibility for anyone who would take the time to look at his history.”
As far as further inflation down the road, Rogers stated inflation is already in the pipeline, and will manifest in higher commodities and consumer prices—of which, historically, have lagged money supply expansion by six months to one year.
As of the week ending Apr. 25, 2012, the Fed reported its balance sheet reached a total of $2.92 trillion, up from $2.71 trillion a year ago, and up from $920 billion in March 2008—well before the brunt of the financial crisis took its toll on markets later in 2008 and early 2009.
A tripling of the Fed’s balance sheet within fours years won’t be the extent of the damage to the Fed’s debt monetizing scheme and the value of the U.S. dollar, according to Rogers, who sees much more Fed money printing to come as well as consumer price inflation as a result.
“Absolutely, they’ve been printing staggering amounts of money; they’ve been taking staggering amounts of debt onto their balance sheet, much of it is garbage,” said Rogers. “The federal government is spending huge amounts of money they have. We have inflation in the U.S., and it’s going to get worse, Simon.”
Rogers said investors have it easier today than prior to the crisis. It’s a heads-you-win, tails-you-win scenario. The emergence of Asia as a source of consumption of raw materials and finished goods will exact pressure on harder-to-find natural resources. If demand is crippled by the financial crisis, however, central banks will respond by debasing their respective currencies, forcing smart money into ‘things’ as a means of protecting wealth.
“In times of inflation . . . that’s put it this way, if the economy gets better there will be shortages of those raw materials and I’m going to make money,” Rogers explained. “If the economy doesn’t get better Simon, they’re going to print a lot more money. Mr. Bernanke doesn’t know anything else but to print money. And throughout history when governments debase the currency, you protect yourself by owning real assets, whether it’s silver or rice, or whatever it happens to be.” [Emphasis added]
Rogers’ take on the most popular asset class among investors who follow the American expat who now lives in Singapore—gold—is that, he holds the precious metal (and by extension, silver) as a reliable means of storing value during a globally coordinated money-printing policies executed among the world’s major central banks. He also discusses the virtues of owning oil as a play on ‘Peak Oil’ in addition to currency debasements.
“I own both [gold and oil] of them,” Rogers said. “Gold has been up 11 years in a row which is extremely unusual for any asset. It’s consolidating; it wouldn’t surprise me if it continued to consolidate. If it goes down a lot more, I hope I buy a lot more. I’m not selling my gold by any stretch of the imagination.”
Rogers added about oil, “The surprise with oil is going to be how high it stays and how high it goes. Simon, the International Energy Agency (IEA) has done a study. The world’s known reserves of oil are in steady decline. We have to find a lot of oil or the price of oil is going to unheard of heights.”