Jim Rogers - on the hit to Gold, Currency wars, Global de-risking & Recession

22 Sep 2011 CNBC
Look at the sea of red for the commodities. All of it is due to the US dollar moving inversely against the metals. All of it is due to the actions of the Federal Reserve and the other countries acting for their own benefit. These are pure macro trends at work.




Background: Gold, Silver and Copper are all hit very hard by the sell-off. Is the world currency war causing a global market meltdown?


David everything is being killed right now. Brazil is igniting a trade-war with tariffs on Asia. China is trying to get the Europeans to let them open up trade, the Europeans are saying no. China is saying we won't bail you out. So there are trade and currency tensions building. It's not a good world [Amazing].

[How important will the trade war become?]
I hope it doesn't break out. Throughout history trade wars create depression. Look at the 1930s. It eventually led to war. Brazil suddenly hit China and Korea with 30% tariff increases. It is not fun.

[Except for the US dollar....is it a short-term buy?]
{He sounds exhausted} I own the dollar. It's going up against major currencies, against everything. There are various reasons for that. One is that everybody is panicked. The US dollar is not a safe haven if you ask me but I do own it.

[What would you do right now?]
US dollar, Swiss Franc or Agriculture.

[On Copper and China]
The Chinese are trying to cool their economy off. They raised interest rates 6 times, they raised reserve requirements 3 times. That is continuing to slow the world economy down.

[On the western debt problem]
The major problems are coming from Europe and the US. We are worse than in 2008. At least in 2008 the government could bail themselves out. Now governments themselves have gotten deep into debt. The US quadrupled their debt. The off-balance sheet guarantees....they took Fannie Mae and Freddie Mac derivatives positions [trillions of dollars]. All governments, pension plans are getting killed with low interest rates. Pension plans have to be funded by somebody so states and municipalities have to fund them even more. Low interest rates are good Mr Bernanke? They are killing a very large proportion of the population [oh my god]

[What is the solution for the European banking sector?]
They need capital. The only solution is that the banks are going to have to write off loans. They will have to be ring-fenced, all of them so that cheques can clear etc. If they don't do it now and the market makes them to do it in a year or two.....there will be uncontrolled chaos and uncontrolled default.


[Presenters on Europe]
"There is a belief ultimately Gary that you will have a Greek default but that it will be contained because Europe will get its act together [Nope - the euro will collapse], that there will be recapitalisation of the banks, that you will therefore forestall any systemic failure of the financial system over there. But yet each day that goes by.....when you have days like this one today it can be very damaging" [Correct].

"These things feed on themselves. Morgan Stanley is down 9 per cent on absolutely no news."



Please let contagion work.
The system of global regulation can save us even if the markets won't allow it.
Look at the dollar index graph. Beautiful.

Category:

People & Blogs

Tags:

• Currency wars
• Global de risking & Recession

[edwardtang1977]

the US just have to turn everything into a war, don't they?

[MrNChoudhury]

@edwardtang1977

It is slightly ironic that for all its benefits the free market has now turned into a global weapon of warfare. On a scale nobody ever dreamed of.

It is exactly a repeat of how the Great Depression affected countries in the 1930s.

[EMPIRE0FLIES]

Metals were hit by margin hikes to stop the rush toward gold and into the dollar.

[MrNChoudhury]

@EMPIRE0FLIES

Yes that's a major reason for the move in gold. I think there are 3 things going on at the same time:

1 - Liquidity crunch resulting from margin calls causes immediate demand for cash to cover positions. People are playing with capital that isn't theirs. This is as much a fault of investors as it is the authorities.

2 - Macro effects across inflation, currencies and the price of gold. This is the realm of central banks.

3 - Fear. People are afraid.

[jezza1789]

@MrNChoudhury No is way worse