"I see more inflation and more currency turmoil as we go forward. There are huge debt imbalances in the world. U.S. is the largest debtor nation in the world and all the assets are in Asia. The largest creditors in the world are China, Korea, Japan, Taiwan, Hong Kong, Singapore – this is where the assets are and the debts are in the West. Those imbalances have to be resolved. They frequently lead to more currency turmoil. We’ll see more inflation, we’ll see more governments fall. We just saw Tunisia fall – more are coming because the world is going to continue to have these problems, and especially inflation that is going to cause more social unrest."
So said investing legend Jim Rogers when he spoke recently with PeakProsperity.com about the inflationary pressures rising dramatically around the globe, despite some governments' best efforts to downplay them. Jim shares his "outside in" perspective on US monetary and fiscal policy, and how international players find themselves forced to react. He sees a lot of fundamental imbalances that need to be corrected for, as well as shortages of almost everything developing. In his words, "It's going to be a real mess before it's over."
In this podcast, Jim explains why:
- Inflation is ramping up worldwide, though many governments are trying to downplay the risk. In fact, the Fed is 'throwing gasoline on the fire' with its prodigious money printing.
- Higher interest rates are inevitable, which will lead to a lower standard of living for everyone – except those who have recognized the risks and invested accordingly.
- Dangerous supply drawdowns are occurring across the commodity landscape (including oil). This will increase the upward pressure on prices.
- Given a future of higher rates, as well as massive debt issuance, Jim took a short position in U.S. Treasuries*
- The world economy is more interconnected than ever. All the players need each other, raising the systemic risk posed if countries start defaulting (which Jim notes is a more common occurance than most people realize).
As with our recent interviews with Marc Faber and Bill Fleckenstein, Jim ends the interview with his specific outlook for 2011.
[*note: Jim has informed us he closed out this short position a week after recording this interview, given the increases in international social unrest.]
Click the play button below to listen to Chris' interview with Jim Rogers:
by mkrismer