NEW YORK (
, the famous contrarian investor, is a long-time hater of the
, bailouts and money printing.
Rogers has been dealt a triple-whammy recently. In the U.S., the monetary policy has been loose and accommodative as the Federal Reserve ushered in a second round of quantitative easing promising to buy $600 worth of government bonds. The Fed didn't back down either in its last meeting Tuesday despite rising interest rates and pressure from Republicans.
Jim Rogers: Fate of the U.S.
There is also speculation the Fed might be forced to issue quantitative easing round three or even four in order to help the government pay for the new tax-cut bill, jump-start the economy and fight low inflation. According to TreasuryDirect, total public outstanding debt is $13.8 trillion and the growing figure has left the
PowerShares DB US Dollar Index Bullish
is up 1.2% for the year and
PowerShares DB US Dollar Index Bearish
has lost 4%, while the U.S. dollar index has rallied 5% since the Fed announced its bond-buying program in early November.
Europe has fared even worse with the European Union and International Monetary Fund having to come to the rescue of Greece and Ireland and perhaps Portugal and Spain. The European Central Bank, despite its more tempered and subtle approach, bought €2.7 billion in government bonds in the week ending Dec. 10 to prop up Portugal and Ireland's debt load.
This was the largest purchase since July and showed that the ECB was in the market to help struggling debt-laden countries. The president of the ECB, Jean-Claude Trichet, has taken a different strategy than his counterpart, Fed Chairman Ben Bernanke, and has avoided money printing opting to take euros out of circulation to offset the bond buying.
Nevertheless, investors seem more negative on the EU than the U.S. The yields on the 10-year bond from Spain and Portugal were 5.49% and 6.55%, respectively, while the U.S's was 3.52%. The yield rises as governments are forced to sweeten interest payments in order to entice lenders. The
ProShares UltraShort Euro
has rallied 12% this year.
So with the EU and U.S. both struggling, I sat down with Jim Rogers to get his opinion on what is the worst and what is the best option for these debt-laden countries.
Let's go to your take of Europe vs. the U.S. Which is worse
Well, the U.S. is the largest debtor nation in the history of the world, but some individual European countries are in gigantic trouble.
Greece, Greece is terrible. The U.K. is terrible. They have serious serious problems. Ireland is in serious trouble, which is worse? The U.S. can print money and therefore it can conceivably put off its problems further than anyone else. But at the same time it looks like the European Central Bank is going to continue to bail out some of the European countries that are in serious trouble.
They're all bankrupt; the U.S. is bankrupt; Greece is bankrupt, we're sitting around diluting ourselves; the U.K. is bankrupt.
So you would call the U.S. insolvent as well
Yes, if you look at the numbers there's no way the U.S. can ever pay off its debt. I haven't done enough homework to know but there are friends of mine who've said the U.S. cannot pay its debt. Within five years, the U.S. will be defaulting on its bonds. I have not done that homework myself.
OK. So what is the fate of the EU
What will probably happen is the euro will break up sometime in the next decade and when that happens some countries will probably pull out of the European community, the European Union. I would expect some form of the European Union to last longer than perhaps the euro, the euro as we know it now.
The euro is a brilliant concept, the EU is a brilliant concept. Unfortunately, the Europeans have brought in too many countries too fast, if you ask me. They should have done it slower and in a more concentrated manner but I'm not European so I can't tell them what to do. So you may see the euro fail eventually, don't forget I own the euro now, and that will cause the EU as we know it to change.
Can you tell the U.S. what to do
Let people go bankrupt ... You can't just say, 'Oh well, we had 30 years of the most outrageous credit bubble in the history of the world. We've done a lot of other things, we've gone deep into debt, it'll be OK, don't worry.'
The world doesn't work that way. If you go on a drinking binge ... for three weeks, it's going to take a while for you to recover. You are going to have to suffer some pain and start over. The same way with anybody who makes mistakes.
But you did say you were in favor of extending the Bush tax cuts. But won't we need higher taxes in order to help our deficit
Cut spending. Making people give their money to the government instead of spending it themselves in the way they want to spend it or invest it or even save it ... sending it to Washington is not going to do you any good. You've got to cut spending dramatically and cut taxes if you want to have a vibrant dynamic economy.
Look at the successful Asian economies. They don't have staggering expenditures. They don't have staggering tax burdens. They encourage people to save and invest and they do and they have very dramatically successful economies.
Check out my recent articles where Jim Rogers talks
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