Jim Rogers to Moneynews: Fed's 'Artificial' Inflation Will 'End Badly'

Image: Jim Rogers to Moneynews: Fed's 'Artificial' Inflation Will 'End Badly'

Sunday, 19 May 2013 08:05 AM

By Dan Weil and Kathleen Walter

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The Federal Reserve is artificially boosting the economy with its massive easing campaign, and it's all going to end in tears, says legendary investor Jim Rogers, chairman of Rogers Holdings.

"Right now, we have a very artificial situation. You have the central bank in America printing staggering amounts of money," he tells Newsmax TV in an exclusive interview.

"There's this gigantic artificial flow of money floating into our economy, and this is going to end badly because it is artificial."

Watch our exclusive video. Story continues below.



So how long will the Fed's quantitative easing ($85 billion of Treasury and mortgage-backed securities purchases a month) last?

Fed Chairman Ben Bernanke has said it's going to continue till 2015, Rogers says. But some Fed officials have voiced hope that QE can be curtailed starting this year.

These folks "are not happy about this staggering amount of money printing because they know it's going to have bad consequences," says Rogers, author of the new book “Street Smarts: Adventures on the Road and in the Markets.”

Editor’s Note: To order ‘Street Smarts’ at great price — Click Here Now.

"It seems that Mr. Bernanke may be leaving in a few months," Rogers says. "I guess he wants to get out before he has to deal with the hangover or the aftermath." Bernanke's term ends Jan. 31, 2014, and the consensus opinion is that he doesn't want to serve another.

But as far as the Fed's easing tactics are concerned, Rogers doesn't see a smooth conclusion on the horizon.

"I don't know how long it will last," Rogers says. "I don't see how it can last much more beyond this year." He sees two possible scenarios. In one, "the market's just going to say, stop, we won't take this anymore, and bonds will go down despite the central bank."

In the second scenario, "the public is going to say, wait a minute, we don't want this paper money anymore. It's too absurd, and prices will go higher, and you'll have more and more unrest in the world."

The dollar recently hit an almost-six week high against the euro, and Rogers has a bleak prognosis for the common currency.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"I hope the euro survives," Rogers says. "We need something to compete with the dollar, which is a terribly flawed currency now. I don’t see how the euro can survive as we know it, though."

The Europeans have made a lot of mistakes in handling the currency, Rogers says. "And, of course, this whole concept that Brussels can control everything. Very few people in Brussels are even elected."

So central bureaucrats are controlling the European Union, and the populace is getting upset about it, Rogers says. "So the euro, as we know it, will not survive. I hope something survives to compete with the dollar."

Meanwhile, Rogers says, "a global currency war is in progress." He finds it astonishing that the dollar has gained 25 percent against the yen during the past six months.

"That's usually leading to some kind of problem somewhere," Rogers says. "Somebody's on the wrong side of that trade. . . . We're going to have more currency turmoil and more currency problems. Be careful."

Rogers thinks a vicious bear market is in store for bonds. "Not this month, but it's certainly going to go back into a bear market," he says. And bond cycles are long for both the bear and the bull, Rogers warns.

"This bull market has lasted 32 years, and the bear market before that lasted 35 years. . . . It's going to go on for a long time, and it's going to be extremely painful for a lot of people."

Elsewhere, Rogers says not to worry about gold's recent tumble.

"Gold had had this remarkable 12-year period where it never even had a down year, which is extremely rare," he says.

"So when something goes down, people come up with all sorts of reasons in hindsight. It was well overdue. You don’t go up 12 years in a row without a down year. It's not the way markets work," he says.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"So now, it's having a long overdue and much needed correction that could last, I don’t know, several days, weeks, months or more," Rogers says. "But it's good for the gold market because gold needs to make a correction, find a new base, a new bottom, and then the bull market can continue."

See these other exclusive excerpts from the Newsmax TV interview:

Jim Rogers: Euro Won't Survive as Currency War Rages On

Jim Rogers: Bernanke to Leave Fed to Avoid 'Hangover' Aftermath

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