Jim Rogers Believes World Is Heading for Depression

This article was originally published on March 22, 2009 on the author's blog.

Here's an informative, in-depth interview with Jim Rogers recorded in the last month - running time ~28 minutes.

Rogers reiterates his disgust with the recent government economic interventions, especially in London and Washington DC. He believes we are making the same mistakes that were made in the 1930s, which led to the Great Depression, and in Japan in the 1990s, which led to Japan's "lost decade" of economic growth.

Some quick hits:

• Rogers is bearish on the UK economy and the Pound Sterling, as he doesn't see what can fill the economic holes of the depletion of oil in the North Sea and London's imploding finance industry

• Countries are starting to question whether they should lend money to the UK and US already

• Capitalism and free markets did not fail - they weren't allowed to work by Central Banks, which wouldn't let people fail (starting with the bailout of Long Term Capital Management)

• Farming will be one of the best industries in the world for the next decade or two

• Debasing your own currency has never led to prosperity

• We're seeing a gradual shift away from the US Dollar as the world's reserve currency, just as there was a slow move away from the Pound Sterling 50-80 years ago

• Printing money has never, ever worked

Comments

[Alex Filonov:]

I also thought that world is going to depression. I don't think so anymore: muddlinginvestor.blogs...

Apr 02 11:54 AM

[AndrewBaker:]

Yes, we are in a depression, and the current rally with accompanying sound bites from financiers, politicians, media commentators and others don't and won't change the fact that many assets are still well overpriced. Bringing the prices down by printing money won't help (look at Japan), and it is only a matter of time before the next marlet fall.

I've been forced into being a short-term bull, but I'm constantly watching to change back into the bear that still roams free, despite all the comment to the contrary.

Apr 02 12:39 PM

[AndrewBaker:]

One more thing: I can't understand the sudden preponderance of bulls on here now. Not long ago many agreed with comments referring to the next drop in the market. Now, every comment I make which even hints at a further market fall in the future gets heavily voted down. Forget the bulls and the bears: how many sheep are on here?

Apr 02 12:44 PM

[MGA_1:]

Going into depression? I really haven't come across a good definition of a depression but it seems to me that a depression could be considered an economic down cycle with which no amount of money printing can reverse the trend.

Apr 02 01:25 PM

[Brett Owens:]

If currency debasing was the secret to prosperity, wouldn't Zimbabwe be the economic poster child for the world right now?

Apr 02 01:49 PM

[Carlos Lam:]

On Apr 02 12:39 PM AndrewBaker wrote:

> Yes, we are in a depression, and the current rally with accompanying
> sound bites from financiers, politicians, media commentators and
> others don't and won't change the fact that many assets are still
> well overpriced. Bringing the prices down by printing money won't
> help (look at Japan), and it is only a matter of time before the
> next marlet fall.

I too remain skeptical of the current rally. However, how would you explain the following:

* 1.8% increase in factory orders in Feb.
* 4.7% increase in new home sales M/M in Feb.
* 0.2% increase in consumer spending in Feb.
* 24.5% increase in auto sales from February to March

Simply put, I don't have an answer and--accordingly--can't really make the continued bear case. I have a general feeling that the problems in the financial sector and housing are so huge that continued deleveraging must occur, but the collection of data from February and March seems to contradict my "general feeling."

Apr 02 02:46 PM

[austrian63:]

To logicalsinger,

I think Jim Rogers does get the fundamentals of wealth creation. He knows that wealth is NOT created by creating money out of thin air. Wealth is created by innovation, production and exchange. Money is merely a medium of exchange and like any other product it is subject to the law of diminishing marginal utility. The more units of money that exist, the less value each unit has.


On Apr 02 09:05 AM logicalsinger wrote:

> I don't think Rogers gets the fundamentals of wealth creation. At
> the root is the intellectual property machine which has been until
> now US-based innovation and technology. Emerging markets wealth is
> derived from that root wealth creation when American and European
> companies move to outsource manufacturing and services. Until you
> see major proprietary innovation and intellectual property (tech,
> pharma, media etc.) coming out of emerging markets, I wouldn't get
> too excited again about those markets.

Apr 02 02:53 PM

[leahcim:]

There was an interview on Fox buisness (forgot who they were), and one of the guests said that (and i paraphrase):
"a depression occurs when the government tries to fix a recession"

i thought that was pretty good

Apr 02 04:49 PM

[MGA_1:]

I think the new economic paradigm is "spend our way to prosperity". The govt is just not working hard enough. Little more money will make those numbers go up !

Apr 02 05:08 PM

[The Geoffster:]

Some good comments here. I'm a well diversified investor who holds gold and silver- just in case. I also own a Glock for the same reason. I trade with my play money. I don't think the world is going to end but good luck if you're heavily leveraged. Sooner or later the FED's creation of all theses bubbles can't be replicated so I'm betting US Treasuries Bonds will burst with the force of the Hoover (pun intended) Dam.

Apr 02 06:50 PM

[Socialism c...:]

It's there already. And we've been educating them in OUR universities at OUR taxpayer expense!!!


On Apr 02 09:05 AM logicalsinger wrote:

> I don't think Rogers gets the fundamentals of wealth creation. At
> the root is the intellectual property machine which has been until
> now US-based innovation and technology. Emerging markets wealth
> is derived from that root wealth creation when American and European
> companies move to outsource manufacturing and services. Until you
> see major proprietary innovation and intellectual property (tech,
> pharma, media etc.) coming out of emerging markets, I wouldn't get
> too excited again about those markets.

Apr 02 07:16 PM

[speeddaimon:]

In all reality, Rogers presents the only truly viable option left to the markets. While I believe that as the government continues to debase the currency and attempt to reinflate bubbles that have already burst, the stock market will rise, it will only be temporary. China is able to continue to prosper even with a manipulated currency because of its overwhelmingly export based economy. The US doesn't export anything. Hell, we don't even make much anymore. A weak currency will only drive prices higher because we import everything we buy. I just don't see a whole lot of long term hope when our government is so focused on the most short term of problems.

Apr 02 11:08 PM

[Fighting Yoda:]

China is not debasing its currency, it simply manages it appropriately for its own advantage, like everyone else.



On Apr 02 08:49 AM User 55065 wrote:

> Mr. Rogers says "Debasing your own currency has never led to prosperity"...China
> has been doing it for quite some time and does not seem to have a
> problem? and Mr Rogers is a China-Bull.

Apr 02 11:09 PM

[Fighting Yoda:]

Things do not go straight down (or up). There will be situations and times things will move up, even in a down economy. The fact remains despite the recession strated in Nov’07 – we had positive GDP growth in first and 2nd Qtr ‘08.

The fact that you have to notice is - how much +ive or -ive. The data clearly shows very tiny upticks - could be noise or general/seasonal adjustments etc.

Basic problem is the credit bubble has burst, many more job losses coming - no real sign of sentiment improvement. This Govt. manipulations of rules, and stimulus etc will not go anywhere - markets are too big.

I don't buy into the rally, I am selling.

On Apr 02 02:46 PM clam75 wrote:

> On Apr 02 12:39 PM AndrewBaker wrote:

Apr 02 11:16 PM

[Marc Liu:]

Way back when they were together, it was Rogers who provided the larger share of performance. Not to take anything away from Soros.


On Apr 02 09:28 AM buyitcheap wrote:

> Was Rogers carrying Soros or vice versa?

Apr 03 08:38 AM

[jpiretti:]

This why the study of Behavioral Finance is so intriguing.


On Apr 02 12:44 PM AndrewBaker wrote:

> One more thing: I can't understand the sudden preponderance of bulls
> on here now. Not long ago many agreed with comments referring to
> the next drop in the market. Now, every comment I make which even
> hints at a further market fall in the future gets heavily voted down.
> Forget the bulls and the bears: how many sheep are on here?

Apr 03 09:17 AM

[jpiretti:]

In the last 3 years of the Hoover Administration, GDP declined 31 %. In the first 4 years of FDR's reign, GDP averaged 9%+ per year. Industrial production doubled and the Dow tripled. Un-employment (private sector) went from 25% to 13%. Does anyone out there believe that these numbers would have occurred organically?


On Apr 02 04:49 PM leahcim wrote:

> There was an interview on Fox buisness (forgot who they were), and
> one of the guests said that (and i paraphrase):
> "a depression occurs when the government tries to fix a recession"
>
>
> i thought that was pretty good

Apr 03 09:23 AM

[jpiretti:]

With all do respect to Rogers (who is a self admitted lousy trader), Soros's performance has been much better for the last decade. Rogers was much too early to commodities and will probably be much too late to equities.


On Apr 03 08:38 AM Marc Liu wrote:

> Way back when they were together, it was Rogers who provided the
> larger share of performance. Not to take anything away from Soros.
>

Apr 03 09:27 AM

[svkoho:]

I like Jim and listened to him last year and bought Chinese companies and commodities and I'm down 50%. Maybe you listened to another Jim Rogers.


On Apr 02 09:24 AM MarkitWacha wrote:

> I listened to this guy last year, before the collapse.
>
> He made sense then, convinced me, and now my kids will have money
> to go to college. And, I'm not bankrupt like some of my neighbors.
>
>
> Thank you, sir.

Apr 03 10:55 AM

[User 177599:]

Take a cup of coffee,keep adding water..(printing more) May look
like coffee,but you KNEW what would happen,no surprise .
R.O.


On Apr 02 04:49 PM leahcim wrote:

> There was an interview on Fox buisness (forgot who they were), and
> one of the guests said that (and i paraphrase):
> "a depression occurs when the government tries to fix a recession"
>
>
> i thought that was pretty good

Apr 04 02:09 AM