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Jim Rogers: Abolish the Fed, Buy Commodities, Short Stocks

NEW YORK ( TheStreet ) -- Jim Rogers is bullish on commodities, is shorting emerging market and American technology stocks and says the U.S. economy is in serious trouble.

Rogers, chairman of Rogers Holdings and legendary investor, gained international fame by calling the commodity rally in 1999 and loves contrarian investments. Rogers sat down first with TheStreet to give his take on the European sovereign debt crisis, the health of the U.S. economy, the possibility of a slowdown in China and his investment strategy for 2012.

2012 Outlook

What's the biggest risk to the U.S. economy in 2012?

Rogers: Probably the Federal Reserve in America because they don't know what they are doing. There are other risks: China is slowing down, Europe's got serious problems. They don't know what they are doing or how to solve it, but I would say the single worst risk is the United States central bank.

And that they would end up printing their way out of whatever slow down we are having?.

Rogers: They already are. They have already started printing money again. And they are printing a lot and they don't seem to understand economics or finance or currencies or much of anything else except printing money.

Why is that the biggest risk compared to say China and Europe as you mentioned?

Rogers: Well, first of all, China is a third the size of the U.S. economy. Europe and America are ten times the size of China. So even if China collapses, it's not the end of the world and even if China booms, it's not going to save the world.

It's important, it's very important but it's not the most important thing. China is trying to slow down and some parts of their economy are going to fail, collapse, they are going to have some bankruptcies.

Europe is certainly extremely important, what's going on there but Europe as a whole is in much better shape than we are. Europe as a whole is not a big debtor. The United States, as a whole, is the largest debtor nation in the history of the world and we've got states that are in trouble -- Illinois, New York, California. Europe has states that are in trouble -- Greece. You know the names as well as I do. No, America is the one we have to worry about the most.

Most investors are now more worried about Europe, however, because they think that we are going to see Greece fail, Italy fail and Spain fail. So what are they missing? Why isn't that the biggest headline they should be looking at?

Rogers: These are problems. Don't get me wrong. These are serious, serious, serious problems. You asked me what the biggest situation is and I am suggesting to you it's the United States. Europe is very important, China is very important, Japan is very important, but America is the biggest economy still and we are the ones with the worst central bank. Our central bank understands less than other central banks and therein lays the risk.

Investment Opportunities

For a retail investor who is not a big hedge fund, who doesn't have all of the algorithms that they can trade off of, who might be say 50% in cash, 80% in cash, what should they do headed in 2012?

Rogers: First, you better make sure that cash is in the right cash. A few years ago many people put their money in Icelandic krona, thought they were very safe. They had currency and they were earning high rates of interest and of course the krona collapsed and some of those people lost all of their money. So make sure you are in the right cash, first of all.

Second, what I am doing with my money is I own commodities and currencies and I am short stocks. I am short American technology stocks, I am short European stocks, I am short emerging market stocks. That's what I am doing but who knows if I am right.

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