Jim Rogers: ‘Terribly Flawed’ Dollar Isn't a Safe Haven

Wednesday, 30 May 2012 04:49 PM

By Forrest Jones and Kathleen Walter

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The U.S. dollar may be in hot demand today, but it's still a "terribly flawed" currency belonging to an indebted nation, says international investor Jim Rogers, CEO and chairman of Rogers Holdings.

Fears that Greece or Spain will exit the eurozone have rattled currency and stock markets worldwide, sending investors fleeing to the dollar in what they assume is a safe-haven asset.

The dollar is not a safe-haven asset, Rogers says, but he owns it merely because it's in demand.

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"I do own the U.S. dollar. People see it as a safe haven, but it is not a safe haven. But people think that, and so therefore I own the dollar," Rogers says in an exclusive interview with Newsmax.TV.

"There is more turmoil coming out of Europe and other currency markets, so people, when they try to look for a place to flee, they flee to the dollar, so I fled to the dollar, too. The dollar is terribly flawed, terribly flawed over the next few years, so be very careful."

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

How long will Rogers hold onto the greenback? Not for very long.

"I don't know how long I'll own it, whether I'll own it for a quarter or a year or two, but I own it at the moment."

The euro has plunged to levels not seen in close to two years thanks to the debt crisis roiling European and global markets.

Greeks go to the polls on June 17 to elect a new parliament in an election seen as a proxy on austerity measures that past administrations accepted in exchange for bailout money from the European Commission, the European Central Bank and the International Monetary Fund.

Widespread anger at those measures, which include painful tax hikes and layoffs, sent politicians from the leftwing Syriza political party snapping up votes in a May 6 election that failed to produce a coalition government, forcing the new ballot in June.

Polls put the more conservative New Democracy ahead now, which favors sticking with bailout policies, but surprises could mean an end to bailout and an end to Greece's membership in the eurozone.

That might not be a bad thing in the long run, Rogers says.

"I think it's the best thing for Europe and for Greece for Greece to go bankrupt and start all over again."

"To my astonishment I hear Greek politicians saying some of the same now. I doubt if it will work that way, because politicians usually like to take the easy way out."

"Nobody likes austerity and I don't like austerity either. But sometimes you have to face facts."

Should Greece exit the euro and default on its sovereign debts, the larger Spain, Portugal and Italy may feel pressure to follow suit, Spain especially.
In Spain, yields in government bond auctions have spiked close to 7 percent, which shows investors view the country as risky.

The government, already enduring harsh financial duress, a recession and unemployment rates over 24 percent, is now pondering selling debt to prop up its banking sector and possibly help regional governments refinance their debts.

Not an easy task for a country already facing sky-high borrowing costs.

"Several countries are essentially bankrupt — Belgium, Spain, Portugal, Italy and even France has problems. So can they afford it? No they cannot afford it. Will more people ask for bailouts? Yes, but eventually they are going to run out of other people's money. You can spend other people's money for a long time, but eventually the other people will start saying 'no more,'" Rogers says.

"Then you have to face reality, and that's the problem with Europe right now — most are trying to avoid reality," Rogers adds.

"I'm afraid you'll see other countries doing the same thing and cause more currency and economic turmoil for several more months and possibly years."

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

Turning to Facebook, whose shares are trading roughly $10 cheaper than their $38 initial public offering price, Rogers says the botched offer reflects overconfidence in U.S. equities.

Facebook share prices have fallen on concerns that despite having 900 million users, Facebook will run into challenges monetizing that base and generating revenue.

"The idea that Facebook, with essentially no profits, with no anything, could come to the market with $104 billion, that's astonishing to me. It's astonishing that anybody would pay it, it's astonishing to me that it hasn't collapsed more," Rogers says.

"It just shows me that there is too much confidence in the American market."

Instead, investors should be focusing on fear-based trades these days, such as pending commodity shortfalls.

"The way you make money in the market, in any market, is when there is despair. When people are terribly worried. That's when you make a lot of money," Rogers says.

In his exclusive interview, Rogers also said:

• Even though gold prices have fallen by around 18 percent since peaking above $1,920 an ounce in late 2011, a shrewd investor will hold onto the precious metal.

• The "world is running out of farmers, so the price of agricultural products has to go up a lot ...  or we're not going to have any food at any price."

• The nation's situation "is very, very dire" this year and neither Republicans nor Democrats can really solve the U.S. economic woes.

• "In 2013 or 2014, we're going to have another slowdown, whether it's caused by Europe or who knows what going caused it, but it's coming."

• The U.S. government makes up the official data it releases on unemployment and inflation.

See these other exclusive excerpts from the Jim Rogers interview:
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