SubscribeJim Rogers: Currency Crisis Coming Soon
The worst of the economic crisis is not over and a currency crisis can happen this year or the next year, because the problem of too much debt in the system has not been solved, legendary investor Jim Rogers told CNBC Monday.
The current recovery is just a consequence of the fact that consumption fell so dramatically in 2008 and people have to buy things they need in 2009, Rogers told "Worldwide Exchange."
"How can the solution for debt and consumption be more debt and more consumption? How can that be the solution to our problems?," he said.
"I would expect there to be a currency crisis or a semi-crisis this fall or next year. It’s crony capitalism, Bernanke and Greenspan have brought crony capitalism to America … but that’s not going to solve the world’s problems," Rogers added.
My comment: A currency crisis is exactly what the end game for the dollar will be. However I am not ready to put a definite date on when it will occur. I think the recent strength in gold is a clear indication that people that get it are diversifying out of paper currencies while they can.
John Polomny
The Real Deal
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Comment by michael norman on 21 October 2009:
The problem is not consumption, it’s a lack of consumption. What is Jim Rogers looking at? GDP has fallen because consumption has fallen. Falling GDP equates to falling household income and job losses. The way to restore growth is to restore aggregate demand, which the government can do by spending (adding that demand). Rogers does not understand the monetary system. The issuance of Treasuries by the government is not borrowing, but used to sustain an interest rate. The Government spends by crediting bank accounts electronically and there is no constraint to the amount of this spending that it can do. When a nation’s resources and capital (both physical and human) are idle or under-utilized, as is the case now, then that nation is said to be living below its means and the longer this situation persists, it raises the risk that the residents of that nation become poorer relative to citizens of other countries. Finally, Treasuries are assets to people who hold them and, therefore, comprise part of the wealth of the non-governmental sector. The only way for government to reduce this “debt” is to take back some portion of that private sector wealth. Is this what Jim Rogers really believes to be the path to prosperity? He must get out of the 15th century.
Comment by James on 6 November 2009:
Productivity is the measure of real growth in wealth in a nation. If government creates money it must be backed up by something of intrinsic value since all money in realtity is a medium of exchange. The best way to increase agregate demand during a down cycle is through fiscal policy such as investment in infrastrucuture which gets people working and increases the capital stock of the nation.
When people are working they are contributors to the wealth of the nation but when unemployed they become dependant and increase the cost of government. People contribute to the wealth of the nation through their taxes, it is their way of giving back and paying off debt but unfortunately there are those who believe taxes are evil and not necessary. This has led to a policy that believes it is okay to pass the cost of our excess on to our children and grandchildren. It is a selfish nation that does this. Treasuries are debt, they are borrowing from the future. We need to get back to producing and paying taxes.