Jim Rogers: Invest in Freedom and Hard Assets (Audio)
Famed author and contrarian investor Jim Rogers spoke with Kerry Lutz of Financial Survival Network about the absurdity of central banks being run by clueless academics. He says that most of the world is under an illusion of prosperity and that our reliance on credit will have devastating consequences. Rogers also echoes Peter Schiff’s message in his latest Gold Videocast — the US is no longer a bastion of freedom. Investors should look to hard assets and emerging markets in countries that have far less debt and more economic freedom.
Follow along with this partial transcript:
Kerry Lutz: What can you tell us about what’s going on in the world right now? It seems like things have gone upside down.
Jim Rodgers: Hope it’s only upside down. I’m afraid it’s going to be worse than that. This is the first time in recorded history you’ve had all the major financial banks printing huge amounts of money at the same time. You’ve got this gigantic artificial ocean of liquidity floating around and it’s going to end some say, Kerry. When it does, all of us are going to be sorry and we’re all going to suffer.
KL: The artificial wave of liquidity, basically, it’s got to come to an end. But nobody wants to pull the plug, nobody wants to be the first to do it. Somebody’s going to be forced to do it, aren’t they. There’s going to be an event, I guess. We all know an event is going to happen. We don’t know what this event is going to be. But, it’s going to happen, isn’t it.
JR: It’s very unlikely central bankers are going to come to their senses. Let’s just suppose for a minute that a miracle happens and one of them says, “Ok guys, we’ve got to put a stop to this.” What will happen is that somewhere along after that the markets will start reacting, and reacting badly. Then they’ll all call the central banks and say, “Oh my gosh, you’re killing us! You’re ruining Western civilization. You’re ruining the world.” The central banks are made up of bureaucrats and academics who don’t know any better, they’ve never had a job, they’ve never been in the market. They will give up, they will panic, and they will say “We’re sorry, we’ll come to your rescue.” Then we’ll have another rally. That may be the last bull one, because eventually, Kerry, your scenario is right. Eventually the market is going to say, “We don’t want this garbage anymore. This is insane. This is absurd.” Then we’re going to have an event. A serious event. And/or I guess the third possibility is that we have some kind of foolishness like a war or something that nobody expects, and that could be the event that precipitates it. I hope it doesn’t happen, because war is never good, but second, if it does happen that way, the central bankers will say, “It wasn’t our fault. We didn’t have anything to do with the problem.”
KL: Maybe the Swiss central bankers were coming to their senses when they broke the peg to the euro? Is that possibly what was happening or were they just forced into it?
JR: They were forced into it. They would still be doing it if they weren’t running out of money and seeing exactly what was happening. They have balance sheets almost the size of the Swiss GDP. They were forced into it, as they had to be. I wrote it in my book you mentioned, “Street Smarts”, I explained that this was all going to happen, that it was going to fail. Of course they didn’t listen. Nobody listens when you explain there’s a problem coming.
KL: Then you have companies like Nestle and pharmaceuticals… “We can’t afford to stay in Switzerland because the franc is so high that we can’t compete. We’re going to move.” Of course that scares the political leadership to death because that’s jobs and the political price of a strong franc— how can they live with that?
JR: The tourists said they’re going to go skiing in Austria instead of Switzerland. You’re exactly right. Everybody was wailing. Nobody mentioned the fact that your standard of living goes up when your currency goes up because everything you imported was cheaper and that you live a better life. All the inhabitants of Switzerland live a better life. Those people don’t say anything if they’re not thinking about it. They’re not out on the streets protesting. It’s the people who are armed who are out on the streets protesting. The rest of the people are just going to work, having a good time, and living a better life.
KL: Is that what’s happening in the US? Are we living a better life now that that the dollar is going up against the euro? We can get cheaper Mercedes-Benzes and cheaper Volkswagons and cheaper bordeaux?
JR: Well yes and no. That’s one of the effects and that’s one of the reasons people think they’re fat and happy. Some prices are coming down, however, it’s being built on a basis of printed money and massive debt. Never in world history has a country built prosperity by debasing its currency, by running up debt. Sure, you can for awhile, and the people people are getting the money are very happy. They’re pleased. They’re going to work every day, they’re making more and more money, and their friends are happy. But it has always failed in the end.
KL: So New York City is an island of illusion and debt?
JR: Not just New York City. Get out your map. Some are better off than others, but New York City is certainly the epicenter of the illusion.
KL: It’s an illusion, and at some point we’re going to wake up and find that not just the emperor, but the rest of us have clothes that we bought on our credit card that are going to be repossessed. We are going to have no clothes.
JR: We’re going to have no clothes, we’re going to have very little food, and I’m not sure we’re going to be able to afford the bordeaux or the Mercedes-Benz.
KL: Or if we own it free and clear, there’s going to be a lot of people who want to take it away.
JR: Well there’s no question about that, and even if you own your house free and clear, that’s fine and dandy, but all your neighbors are going to be forced to sell their houses. Your house is going to go down in value, and who knows, you might even lose your house if you have to dump it….
KL: When talking about international diversification, what countries out there for freedom-loving people these days? Freedom seems to be the most scarce commodity in this day and age, Jim, and a quickly vanishing commodity.
JR: Well there’s no such thing as safe when you’re talking about freedom, because everybody seems to want to take it away. Now I’m not the first to know that power corrupts, but it always, always corrupts. There’s no question about that. As far as countries though, some countries are better places to be than others… Kerry, as I look around the world, and you know I do this all the time, it’s hard to find a place. Now I live in Singapore, and Singapore has an authoritarian leader, but at least it’s less authoritarian than many other countries and it’s a very efficient and delightful place to live. I see countries opening up, I see Myanmar opening up from a terrible dictatorship for many decades. I see North Korea opening up. If I said to everybody, “Go to North Korea, because that’s where you’re going to be safe, they’d all hang up the phone and say, what’s wrong with this guy.” But the way you do succeed at anything is you look at a desperate situation, especially one that’s cheap, or that’s repressive, say, “It’s opening up”. It’s hard to do. It’s like buying a stock that’s cheap. Nobody wants it when it’s cheap, but that’s the way to capitalize. If you look at Asia 50 years ago, South Korea, Taiwan, Singapore, Japan— all of these were one-party states that were very, very repressive. Now they’re all vibrant, successful democracies. If you had wanted to go to some of those places 50 years ago, and I certainly did not, now you’d be living a lot more freer and a lot more prosperous than before. But it’s hard to do. It’s extremely hard, just like buying low.
KL: I think that’s such a great point you make here, Jim, that you’ve got to somehow look ahead of the trend and get ahead of it and freedom is just another trend, right? When you get back to it? When you go back to the founding of the United States, freedom was just a trend, and it lasted a long time. Perhaps the trend’s reversed or perhaps the trend’s reversed slightly temporarily and it’s going to come back stronger than ever. We don’t really know that at this point, do we?
JR: Well what usually happens when you have economic collapse or problems of any kind is that a strong man on a white horse comes along and says, “Don’t worry, I’ll save you.” And everybody says, “That’s wonderful. Do it, do it, do it.” It becomes worse as he becomes more repressive, and then people realize, “Oh my gosh, this is even worse.” But those kinds of things take awhile. It’s unfortunate, but they do take awhile. Even when the United States started, most people in the world didn’t pay any attention and thought it was a joke. Well we know it turned out to be the most successful country in the world in the 20th century, but it was certainly a joke for a long time.
KL: Great point, and you have to take every trend seriously. Some you have to take more seriously than others.
JR: Absolutely. Most things don’t work out in the end. That’s why it’s hard to be successful at anything…
KL: We look at Chile — that’s been a remarkably successful experiment. You had problems with freedom, a repressive military, problems with separation between state and military rule. But overall, you look at the success story there, but you wonder, “can it continue?” There’s some alarming trends there. Is it worth rolling the dice there, you have to wonder.
JR: Well it’s worth rolling the dice anywhere. We do know, or at least, I think I perceive that the US is in decline, at least relative, economically in decline and as far as freedom is concerned. Maybe there are people who would disagree with that. I’m sure Barack Obama would disagree with that, but he’s part of the cause. Everybody has to make their own judgment. It’s not easy… The debt is going higher and higher. You know what’s happening in Europe. They talk about austerity, but every one of those countries has higher debt every year despite all the talk. The facts are pretty clear. These things have happened throughout history and they always come out the same in the end. You and I were talking about this earlier. You know this is all going to end badly some day. Well, I’d rather be in a place where the creditors have huge assets and strong work ethic than in places with big debt and no work ethic.
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