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April 04, 2011

Jim Rogers, Commodities Guru, Interviewed on his views on China, the USA and the world

Jim Rogers was a co-founder of the Quantum Fund, and is creator of the Rogers International Commodities Index (RICI) and has made accurate predictions on world Commodities, the world economy and the development of China.

* Chinese economy has some overheating and inflation, which they are wisely trying to cool – especially in urban, coastal real estate. They have huge reserves so will suffer less than others in any coming downturn.

* there is currently a correction/ set back in China's real estate

Question - Why so many empty cities and malls in China? Does the government have plans to move rural folk into cities en masse?

Jim Rogers: That is a bit exaggerated. China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.



Daily Bell: The Japanese were going to buy PIGS (Portugal, Ireland, Greece and Spain) bonds. What will happen now? Does that only leave China?

Jim Rogers: Obviously the Japanese have other things on their mind right now. I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt. The thing that the world needs is for somebody to acknowledge reality and start taking haircuts.


Daily Bell: Are you more optimistic or pessimistic about the EU these days? Last time you told us the world needed the euro – a big market with breadth and depth. But you weren't sure it was going to last. Any new insights?

Jim Rogers: I didn't say that the world needed the euro, I said it would be good for the world; we need something to compete with the US dollar. On paper the euro would be a great competitor. However, as I have said before, it is a political currency rather than an economical currency, and I would suspect that this pushes the euro closer to a moment of truth.

The Germans are now in control and they will be able to make everybody toe the line. The Germans expect to hold the euro together during this period of pain, and I hope they can. As I have said before, the world needs something to complete with the US dollar. I would expect the euro will survive this particular round of problems, and this will be good for the world and the euro in the long run.

Daily Bell: Any more thoughts on the American Tea Party, which just scored some political gains? As we recall you were critical. Any further insights for us on the American political situation?

Jim Rogers: Well it appears that America does seem to understand, at least on paper, that there are staggering problems. We still haven't seen much action. I haven't seen anybody cut any spending in a serious way. We are still bankrupt and the situation is getting worse, not better. Now, usually when you have this kind of situation it usually leads to social unrest and more political backlash, I suspect it will this time too.

Daily Bell: Some say the US is trying to surround China. Is there more military tension between the US and China these days? Is that a bad thing?

Jim Rogers: I don't know there's more military tension between China and the US these days. The US is in Pakistan, but the Pakistanis have been allies of the Chinese for a long time. If Pakistan is becoming more destabilized, then they are not going to be an ally of the US against China I assure you. No one in Pakistan is going to say, let's support the US against China.

Everybody knows the US is becoming weaker and weaker geo-politically and militarily. If Venezuela and Colombia went to war tomorrow, there's nothing the US could do. We're over-extended in every way. I think our real position is even weaker than it appears. We may be talking a good game, but China is developing on it's own, and since I don't see that they are doing anything that threatens the US militarily, I am perplexed with this question.

Politicians may be railing more and more about China, but that's a verbal encirclement of China, not a military one. China is the richest country in the world now and we are the largest debtors in the world. That accounts for verbal attacks. Pressuring China militarily won't change the equation.

Daily Bell: Where is gold headed? Silver?

Jim Rogers: Everything I have told the world about gold and silver is going to continue to happen. Eventually gold will be a couple of thousand dollars an ounce, and probably much higher, as currencies become more debased, who knows how high. Silver will definitely reach new highs. As I have said, the US dollar is in serious trouble, and will be debased a great deal in the future, and eventually will be problematical itself. So gold and silver will be measured by the US dollar but I hope there will still be some sound currencies no matter what happens.

Daily Bell: What are some of the best little known investments these days?

Jim Rogers: I am still optimistic about the future of agriculture, but I don't know about how little known that forecast is at this point.

Daily Bell: Do you still believe commodity price inflation generally is a big trend?

Jim Rogers: I don't believe in "belief." I only like to invest in things that I think I know. People who fall in love with their investments or believe in them, usually have problems. I think commodity prices are going to continue to go much, much higher. In several years, we are going to continue to see shortages of things to develop and there continues to be very little investment in productive capacity of anything. Agriculture is continuing to turn into a disaster and I continue to encourage people to understand that those shortages are going to get worse, and that there is going to be more social unrest around the world, and that more governments are going to fall around the world.

People don't go into the streets if the price of copper makes new highs but when the price of rice and wheat and sugar go through the roof, everybody knows it instantly at the same time and everybody is unhappy instantly, and at the same time. So that's where you have serious problems developing and shortages, and that's why agriculture is a great place to invest. There are plenty of ways to invest in agriculture. There are going to be shortages of food and this will continue. As I said before, my portfolio is in commodities and currencies on the long side.

Daily Bell: What about oil? Give us your take on Peak Oil. Is it real? Does it exist?

Jim Rogers: I don't know if there is Peak Oil or not. I do know that known reserves of oil are in decline. That is a very simple statement. Is there a staggering amount of oil out there in the world? We don't seem to know where it is, though we hope we find it soon and that it is accessible. The price of oil and all energy is also going much higher.

Daily Bell: Any comment on water shortages? Is potable water the next big investment?

Jim Rogers: I don't know if we discussed water last time but I have discussed it many times. There are huge shortages of water developing. We have wars developing east of the Red Sea over oil, and we are going to have wars west of the Red Sea over water. Northern India has a staggering water problem and so does northern China. Southwestern part of the US has big water problems. If you can find a way to invest in water, you are going to be extremely successful and rich.

You shouldn't own water, though, because if you own water the politicians are going to snarl and sneer and say you are capitalizing on God's-given-right to water, you filthy capitalist. If you are lucky, they will hang you in the public square. If you are unlucky, it will be worse. But if you can transfer water or clean water or provide water, they will build a monument to you in the public square, and you will be extremely rich.

Daily Bell: We asked you this before. What will the world look like in 10 years?

Jim Rogers: There will be many different governments and many different political parties and unfortunately more destruction from civil wars and outright wars. The world will still be in a state of turmoil and perhaps it will be much worse. I could be wrong but you should at least examine the possibility that I might be right. What I would encourage everybody to do is to figure out ways to protect themselves. Most people have insurance policies, like fire insurance, car insurance, health insurance and you hope you never have to use them. But I would hope that everybody takes out some kind of insurance policy for their money, in case I might be right and hope that I am dead wrong and then it's unused money. But if I am right, at least it's some protection.
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