Q&A met Jim Rogers door Tim Schelle

SerVicE is de studievereniging opgericht door en voor studenten aan de mastertrack Real Estate Management & Development (REMD) aan de TU/e. 

Jaarlijks organiseert SerVicE een studiereis voor zijn leden naar een, vanuit vastgoedperspectief, interessante wereldlocatie. Dit jaar was de bestemming Singapore en er is door alle studenten (in groepen) gewerkt aan een case om gericht bepaalde aspecten van Singapore te leren. Een groep van acht studenten heeft daarbij een interview met meesterbelegger Jim Rogers voorbereid.

Rogers die in Singapore woont, kreeg een aantal korte en heldere vragen voorgelegd over het verloop van de crisis, goud en de toekomst van geld. Het interview van 27 april is door Tim uitgeschreven en in zijn geheel hieronder te lezen.

Since the global financial and economic crisis, the economies of First World countries are in decline. The U.S. has reached its debt ceiling of $14.3 trillion and debts are repaid with more and more debts (QE1, QE2 and maybe QE3, 4, 5, 6, 7?). In Europe, the same shocking facts occur; PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) can’t survive without IMF support and Portugal, Ireland and Greece are facing the restructuring of their debt. The only way to solve the financial problems and get rid of the massive accumulated debts is by restructuring the debts or by letting countries go bankrupt. Foregoing brings along major implications for the currencies of both continents.

Q: Do you agree with the proposition that the only way to get rid of the mind-boggling debts is restructuring the countries’ debts?

A: “In the past 20 years whenever people got into trouble in America, the central bank, Mr. Greenspan, came to the rescue; incompetence was rewarded, moral hazard was exacerbated. Greenspan should have let people fail! The idea that you can solve a debt problem with more debt and more consumption defies comprehension. The US is the largest debtor nation in the history of the world – and that's what you inevitably end up with. The US cannot ever pay off the debt and the sooner the country restructures realistically, the better. Otherwise what lies ahead is several centuries of decline like other countries – like Japan, a country that used to be rich and successful.”

Q: With foregoing in mind, is your opinion also that the crisis wouldn’t have occurred while the gold standard was still in place? Thus, are you in favor of reintroducing the gold standard, or a gold and silver market standard?

A: “Well the basic situation now off course is that the most politicians nowadays know how to buy votes. So they know how to debase currencies. Fifty years ago or sixty years ago there were still many countries in the world that insisted on sound money, sound currencies; Germany, the Netherlands, Japan, Austria. You know, there were some countries that if you had raised the prospect to debasing your currency you would not have won any election you would have been run out of office and you would have been run out of the country, because the idea of an unsound currency was absurd. But over the past few decades the politicians have leaed to buy votes and the easy way to buy votes is to debase the currency; give everybody whatever they want. So now even in some parts of Europe they know how to debase currency.” 

“The Germans and the Dutch and the Austrians and the Fins and a few people still think they want sound currencies and insist on it, but not like they did sixty years ago. We did abandoned the gold standard a long time ago, when we had the gold standard of course that was a discipline imposed on people but the gold standard was basically abandoned in the thirties by most people, eventually abandoned by everybody when the US cut of the gold standard in the early seventies. Could we have had us the crisis we had had recently with the gold standard? Probably not; we would have had a different crisis. The reason the gold standard keeps being abandoned throughout history is because it does impose a strict discipline. Politicians don’t like strict discipline; they like to be able to buy votes. And people, nations, citizens usually don’t like strict discipline neither. They like the easy way. People have used gold and silver for many centuries, the gold standard too has always been eventually debased, and eventually abandoned because no one likes strict discipline. In fact the English term ‘debasement’ comes from the fact that the Romans put base metals, base metals being cupper led tin zinc, put base metals in to their pure silver coins and debased it more and more. So that after a couple hundred years in Rome, what started out as pure silver coins only had one percent silver in the end and all the silver coins had disappeared because the smart money took the pure silver coins and put them in the safety deposit box somewhere. So the crisis we recently have experienced could not have happened under the gold standard, but we definitely would have had a different kind of disaster.”

Q: Looking at the economic developments of the present day, you don’t foresee that the gold standard gets reintegrated in the near future? With the probability in mind that the US dollar could get devaluated and the fact that China is grabbing all the gold they can get, isn’t the reintegration of the gold standard the thing that should happen?

A: “I too, I certainly see what you see. I see that people are buying gold and more and more people insisting on gold including the Chinese, because they know what you know, what I know. Yes more and more people are buying gold and silver since the price of gold is at an all-time high, the price of silver will probably will make an all-time high sometime in the next few years. Yes, and people are getting more and more suspicious of paper money. And paper money is being more and more debased and there may be a time in the next decade – there probably will be a time in the next decade – when none of us is trusting paper money. This has happened throughout history. But the solution, while a temporary solution may be gold and silver. But again to repeat, throughout history people have used gold and silver but when they, when it comes to onerous, they move to something easier. They either put lead in the silver coins or the gold coins they do something else.”

“So I hope that the Dutch once again insist on a sound currency and the Germans, but I promise you that after a few years or a few decades, good Dutch citizens are going to say; “we don’t like this discipline, it’s too much discipline”. And they too will find a way to get around the gold standard. My solution would be not to dictate what people must use for money. Eventually the great mass will figure out what they want to use for money and they will do so.”