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.

And the currencies, which ones are you long?

Rogers: Well, the main currencies I am long are the Yen and the Swiss franc. I do own some euros. I do own some U.S. dollars. What would I buy right now? I would probably buy the Swiss franc if I had to buy something today.

Are you worried about the exchange rate pegged to the euro, that the Swiss National Bank will try to devalue their currency ?

Rogers: The Swiss National Bank has been wrong several times in the past few years. I don't worry too much about central banks. One of the things I learned in my career is that usually if you go against the central banks, you are probably going to be very successful. The Swiss Bank did knock down the Swiss franc a few weeks ago but they have done it a few times and in the end the market has more money than any central bank.

So you should fight the Fed?

Rogers: Well, in some ways, yes.

Europe

When we spoke last, you said that in 10 years the euro might not exist in the way it does now. What would it take to speed up that 10 year time horizon and have you shorting the euro instead?

Rogers: Well to repeat, I am long the euro at the moment because I suspect they are going to do something, whether it's phony or not, they are going to do something to make everybody feel better about the euro. Make me feel better about shorting the euro? Well I can't think of anything would make me short. Even if people started pulling out, I mean if the Greeks pull out, the market will think that's good for the euro. I can't think of anything that would make me short the euro at the moment. If I think of something, I will call you or send you an email.

What do you think will make you speed up that time horizon?

Rogers:If they all say this is not working out. It's too much trouble, too much pain. The politicians would rail against Brussels and then you would start having everybody disintegrate. At that point there wouldn't be a euro. It would happen sooner but the Germans certainly don't want the euro to disintegrate. Several others don't want the euro to disintegrate so I don't see it happening anytime soon. I do see it happening eventually but not at the moment.

What will change?

Rogers: Politicians. There will be new politicians. Things will be worse and worse. The world economy is not going to be great in the next ten years so if you have another lost decade in the West then people are going to get unhappy and upset and they will get new politicians and the politicians will blame everything on Brussels. Brussels can't send tanks ... to keep everybody in line so it will start to disintegrate.

So then for an investor what should they look for, for the health of the euro?

Rogers: If the economy is good, everybody will be happy with the euro. When economies are good some place people are happy with their politicians, they are happy with the system and everything else. But when they start going bad, then they start looking for people to blame. They throw out politicians. The politicians respond to the mood of the day. You need to watch the economy in Europe and if it continues to flop along, then the people are going to get unhappy and ... so they are going to throw those politicians out and demand that something changes.

Isn't that already happening?

Rogers: Well its happening but not enough to for anybody to pull out or pull the trigger. Yeah, people are getting unhappy the Fins don't want to pay for the Greeks anymore. The Dutch don't want to pay for the Greeks any more. No, it's happening, but it hasn't happened enough yet that you can bring in the firebrands that insist on lots of change.

What's the worst thing that Europe could do right now?

Rogers: The worst thing they could do is to keep doing what they have been doing for the last two years. Just saying don't worry, everything is going to be ok, we'll lend you some more money. The worst thing is to continue what they are doing. So far, Alix, if you look at all of the plans, for all of the countries, none of them show reduced debt next year or the year after or the year after that. They all show their debts continuing to rise. If they continue to do that, eventually the market is going to come to them and say no more. We won't give you any more money. We aren't going to play this game anymore and then the whole system could collapse.

Do you think they fiscal consolidation that France and Germany are trying to put forth this week is actually going to make any difference or is it more of the same?

Rogers: No, it's more of the same. The Germans have not really said for fiscal consolidation, they would like to have everybody to mind them, but the French aren't going to say "yeah, we will let Berlin run the tax system and our spending system." Even the French would say "do you remember the Second World War? We are not going to do that."

So what should the credit rating of the 17 nations in the Eurozone be?

Rogers: Different ones should be different things. I mean Greece is fail, whatever the fail is.

Should Germany and France still be AAA?

Rogers: No, of course they shouldn't. France certainly shouldn't. There's not many people that should be AAA anymore, maybe Finland, maybe China. I can't really think of many countries that should be AAA anymore.

China

What would a hard landing look like in China?

Rogers: Some parts of the Chinese economy are going to have a hard landing. The Chinese for two years now have been tightening up. They have raised interest rates six times. They have raised reserve requirements a dozen times. Just recently they started to loosen this up a little bit but they are trying. They are trying to bring down real estate, they are trying to make real estate developers go bankrupt so you are going to have a hard landing to use your terms in things like property in China.

But other parts of the Chinese economy are going to continue to boom: water treatment, agriculture, farmers are not going to know that the real estate speculators in Beijing and Shanghai are going bankrupt because they are working too hard and making too much money so you are going to have sectors of the Chinese economy with serious problems but it's not the whole Chinese economy. It's not like it was here.

Some have argued that China has taken the first steps to start pumping more money into the system by cutting reserve requirements, that they will continue to do so in 2012 especially when the government transitions leadership in late 2012, do you think it's going to happen?

Rogers: Well, you are right. They have loosened up twice in the last month or two. I wouldn't if I was China but I am not China. It looks as though they are going to start loosening up. I guess the real estate speculators are calling up and saying save me, save me, save me and they are starting to listen.

Bad idea?

Rogers: It's a terrible idea. They need to crack inflation. They've got a serious inflation problem. Either they have to beat inflation internally or they have to make the currency convertible. They are apparently not going to make the currency convertible. Now if they continue with inflation, then they are going to have even more problems a year from now, two years from now.

The biggest risk in China would be an inflation not a deflation scenario with property prices falling so much?

The worst problem is that their inflation comes back -- they have all of this money trapped inside of China and its sloshing around and it goes back into real estate. I mean they did this once before three or four years ago. They tightened up but then they got scared and then they loosened up again before they cracked the real estate problem and they may do it again -- that would be a serious problem.

Some U.S. stock investors are excited about more monetary easing in China. They want to get in on certain stocks that are going to have a lot of growth there. What would you be doing instead?

Rogers: In China, I am doing nothing. I own Chinese shares. Whenever Chinese shares collapse, I buy more, but they are not collapsing yet. The only thing I am doing in China is I own the Renminbi and periodically when I can I buy more Renminbi. You can't just pick up the phone and buy a lot Renminbi but there are ways to buy it and commodities. I mean if you want to play China, commodities are a great way to play because they have to buy cotton, they have to buy lead, they don't have any choice.

What's the best commodity, would you say, to play China?

Rogers: Any of them, all of them. The Chinese need everything. They have 1.3 billion people and they all want to live like you, and so you know everything: cotton, wheat, oil, everything.

Japan

Let's stay in Asia, I know that you are bullish on Japan stocks, I have read recently. Are you worried about weaker growth there as export demand from Europe and Thailand tanks?

Rogers: First off, you shouldn't believe everything you read. What I said about Japan was that the Japanese stock market today is where it was in 1983 -- that's 28 years ago and so things are very cheap. Now there are reasons that they are cheap but they are so cheap that it seems to me that people should start looking at some Japan shares because Japan has reoriented itself. They are now a way to play Asia and a way to play China. So there are going to be great buys in Japan. It's cheap. They reoriented the economy. I am not giving up on Japan at all.

But what would your time frame be? What would the retail investor's time frame be for that?

Rogers: Oh, no, I would only own Japan for a year or two or three. Japan's got serious problems. Japan is the largest internal debtor nation in the world and they've got a declining birth rate, a declining population. No, no ten years from now, I couldn't imagine owning Japan. Japan is going to have horrible problems 10, 20 years from now.

Commodities

You have been calling for a gold correction. Are you still looking for more of a correction in gold?

Rogers: Gold is up 11 years in a row now. Very few things in any asset are up 11 years in a row without something happening. So I would suspect that gold, that something is going to happen. Gold has been correcting for over three months now so it's in the process of happening. I would just suggest that's what could happen and what should happen. And if gold goes down, I will be buying more and if it goes down a lot, I'll buy a lot more. I am not selling my gold.

What would your criteria be for buying gold somewhere near a bottom?

Rogers: Well if gold were $1,200, I would rush out and put a lot of money into gold. And that's not such a strange statement, by the way. Many assets go down 40% or 50% over a year or two period. That's not unusual at all. In the 70's gold went up 600%, went down 50% -- scared everybody out. After everybody got scared and sold, it went up 850%. That's not unusual in markets. So if gold went down a lot, I'd buy a lot more. If it went down, I don't know, $1,500, I'd certainly start buying. If it went to $1,400, I'd buy more and if I was still solvent at $1,200 or $1,100, I would buy a lot more.

Speaking of $1,200, it would break a long term trend line, a lot of traders would be scared of it because the chart would look broken. What would $1,200 gold mean?

Rogers: Well, see you know all of these things about charts. I don't know all this stuff. I don't pay attention to them. But it certainly scared them in the 1970's when gold went down 50%, I guess it broke all the charts and scared everybody and they sold out.

All it would mean is that some speculators were dumping their gold or losing their faith. Right now we've got a lot of correction in the commodities markets because MF Global went bankrupt and there's a lot of forced, artificial liquidation but liquidation is liquidation whether it's artificial or not. And that's what happening. If gold went to $1200, it might just mean that -- that there was forced selling.

A lot of people say, gold's not at $2,000 and it should be because Europe is falling off a cliff.

Rogers: For whatever reason, gold is not at $2,000 with Europe falling off a cliff like you said. But as I said, I own the euro. I expect them to paper it over for at least for a while. Maybe that's why gold is not at $2000.

Let's say on that logic -- let's say that Merkel does something that seems reasonable and logical and everybody says the worst is over. Stocks around the world will go up including in the U.S. I'll lose money on my shorts. Gold will possibly go down too. Then combined with forced liquidation and if you have somebody else who is over extended and they would have to dump their gold. You can come up with all kinds of scenarios. You are a reporter, that's what you are paid to do. You come up with the scenarios; I am just a simple investor.

What's your gold outlook for 2012. What do you think is going to happen in the market?

Rogers: I don't have one. You should watch TheStreet.com. I don't have one. I am a terrible trader in the short term and I am a horrible market timer.

If you had to pick one commodity, you had to own right now, if you could only pick one, what would it be?

Rogers: Well, it would be agriculture -- something in agriculture.

U.S.

Going back to the U.S., what should the Federal Reserve do at their upcoming meeting, aside from quantitative easing round three, or QE3. We've seen more Fed presidents come out and call for more monetary easing. What should they really do?

Rogers: QE3 is already here, Alix. Get out the numbers for non-seasonally adjusted M2 and you will see that Mr. Bernanke said that in the summer we are going to keep rates artificially low. Now you can't just say the words. You've got to do something. And so they went into the market. The money supply numbers skyrocketed. They are in there. They are in there buying already. You can't just say the words. You've got to do something and they are in there buying. And that's why M2 has exploded. They are already easing and they may ease some more. Again, I told you, the worst risk facing us is the United States central bank which doesn't have a clue what they are doing.

And to your point the M2 supply is over $9.5 trillion, up 20% since November 2008. However, then why are you long the dollar?

Rogers: I am long the dollar because of all of the chaos going on around the world and because people dumped the dollar. There was lots of selling. Everybody is bearish on the dollar including me. I am the biggest bear in the world on the dollar but when I saw everybody too bearish, I bought dollars. There is this chaos and I am afraid there is going to be more flight capital. People see the dollar as a safe haven. It's not a safe haven. But since it's still in people's mind that's why I still own the dollar. But when people start getting exuberant about the dollar, if they do, I'll sell my dollars and I may never own the dollar again.

So what should the U.S. government do right now, with the Fed on the wrong policy, with jobs still really bad in the U.S. and with growth moderating, what should the U.S. government do?

Rogers: They should abolish the Federal Reserve. That would be the first thing they should do. They are not going to do that but what they should do is let interest rates find their normal rate, their realistic level. Right now masses of people in America, the people who save and invest, the people who we would say have done the right thing, are being destroyed because of low interest rates.

I mean think of all of the retirees. Not even the retirees, the people who have been saving and investing. They are being destroyed by the people who have done everything the wrong way in the past 10 or 20 years. When you destroy your class which saves and invests, you are really undermining the system very very badly. And I find that not a good thing.

So, if I were the Federal Reserve, now they would scream and say you can't do it, we'd have problems , we'd have unemployment etc. I beg to differ with them but even if we did, we've got to correct them. We've made a lot of mistakes in the past 50 years. We are the largest debtor nation in the history of the world. I mean it's staggering what we are doing. The debts are going higher and higher and someday, you've got to pay the piper. This has been going on for a long long time. You can't just wake up one day and say well you know we've made a mistake, let's change that. You've still got to pay for the mistakes.

What should the U.S.'s credit rating be?

Rogers: We are the largest debtor nation in the history of the world and the debts are going higher and higher by trillions, every two or three years. I don't know. I don't quite know how the ratings agencies work because I don't pay any attention to them. You shouldn't pay attention to them either. Nobody should pay any attention to them.

They have proven many, many times in the last few years, they don't know what they are doing. They have made huge mistakes, but I don't know, BB or something like that. You know you've got a huge, huge debtor, the largest in the history of the world, getting deeper and deeper into debt. That's not something that's worth AAA. That's not something that's worth A in my view.

-- Written by Alix Steel in New York.

>To contact the writer of this article, click here: Alix Steel.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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