Classic Liberal Blog

Jim Rogers, the famous Wall Street investor and financial commentator now based in Singapore says in reference to America, "Karl Marx is probably dancing somewhere."

Jim Rogers is co-founder of the Quantum Fund, a college professor, author, and creator of the Rogers International Commodities Index (RICI). Although he doesn't consider himself a member of a specific school of thought, he says the Austrian School of economics best fit his views. Rogers also thinks we should abolish the Federal Reserve.

Jim Rogers talks Australia, China, United States

''My suggestion is that people should move to Asia, and teach their kids how to speak Chinese," says Jim Rogers, the man who made his fortune betting against Wall Street in the 1970s. In 2007 he took his own advice, moved out of Manhattan and set up shop in Singapore. He remains bullish about China and "countries that are going to benefit from the rise of Asia, such as Australia". Marcus Reubenstein reports.

In 1988 Rogers became the first Westerner, possibly the first person, to ride a motorbike across China. He did it again in 1990 and then in a car, with his wife, Paige Parker, in 1999 - on a round-the-world journey that included 5½ weeks travelling, west to east, across Australia.

''These trips brought home to me,'' he says, ''that China was not a communist country. They were not horrible bloodthirsty people, they were extremely hardworking people. Despite what they called themselves, they were capitalists.''

Four decades ago - in the home of modern capitalism - Rogers partnered with George Soros to establish one of the most successful hedge funds of all time. ''A couple of us started a fund and it was successful,'' he says, sounding almost embarrassed about that success.

The Quantum Fund wasn't just successful; over the decade in which Rogers was involved, the S&P 500 advanced 47 per cent - while Rogers and Soros managed returns of 4200 per cent.

''In 1974, there was something called the Nifty Fifty,'' Rogers says. ''They were supposedly the 50 great stocks that would have rising earnings forever. They all sold at huge multiples of their earnings, they were just very, very expensive stocks and we shorted a lot of them.''

''China is one of the best-run countries in the world right now,'' he says, ''and that's just based on results. They call themselves communists but they're among the best capitalists in the world.''

China has many problems, he admits, including a blocked currency which has helped create an internal property bubble as increasingly wealthy investors have few options for parking their funds.

But, he argues, the problems of the US are far greater. Rogers has been a strident critic of America's massive bailout packages, its architects and its beneficiaries.

''Karl Marx is probably dancing somewhere,'' he says with a grin. ''Because, in America right now, the government owns the automobile industry, the insurance industry, the mortgage industry and the banking industry. The government suddenly owns huge parts of the American economy - that's what Karl Marx said he wanted, and he didn't have to fire a shot.''

As for Australia, he says: ''The only disappointment I've had is that your politicians are as bad as the ones in America.

If the Australian government keeps running up such gigantic debts, the lucky country is going to run out of luck.''

Rogers, who supports neither side of politics in the US, is highly critical of the Rudd government's spending policies and sees no logic behind its decision to impose a super profits tax on the resources sector. ''Further taxing resources is not going to bring out new supply, so it will hurt us all in the long run,'' he argues.

''Do you think politicians are going to find new supplies, much less develop them? If your government insists on taxing the golden goose, it should at least pay off debt so when the bad times come Australia will suffer less.''

But Rogers has praise for the Reserve Bank under its governor, Glenn Stevens. ''I wish your central bank was running the US Federal Reserve,'' he says bluntly. ''Your guys have done a much better job than most other central banks. I didn't say they're doing a great job; still, it's a much better job.

''They [the RBA] see what's going on in the world. Yes, they have the advantage of a strong economy, but at least they're doing the right thing, instead of denying reality.''

And he sees a bleak future for any currency backed by massive debts. Top of his list of bad currencies is the once mighty greenback. For which, in great part, he blames the former US Federal Reserve chairman Alan Greenspan.

''In 1998, Greenspan bailed out Long Term Capital Management [the US hedge fund with over $US5 billion in debts], then he bailed Wall Street out again in 2001 because of the dotcom bubble - the bubble he caused because he kept printing money and bailing out everybody in sight.''

Rogers points to Japan, which he argues spent two decades bailing out what he calls ''zombie banks and zombie companies''. Referencing the Nikkei Index - which peaked at about 39,000 points in 1989 and today is trading below 11,000 points - he says, flatly, ''Bailouts don't work!''

Total US government debt is now about 90 per cent of GDP. ''Next time we have a slowdown, or a recession,'' Rogers asserts, ''America has shot its wad. Ben Bernanke [the US Federal Reserve chairman] can't keep printing money - the world is going to run out of trees at the rate he's printing money.''

His negativity towards the British pound is based on similar concerns. He calls the euro a political currency, which the architects of the Treaty of Maastricht got right but the nations of the euro zone got wrong by ignoring their own rules.

''Greece is bankrupt,'' he says, ''whether they acknowledge it or not. Greece should have been made to take its pain, otherwise it will never change. In five months, years or decades later we're going to be having the same conversation, only worse.''

And of the euro zone's latest bailout package? ''The idea that you can solve the problem of debt and consumption with more debt and consumption defies belief.''

He may be one of the investment world's best-known Sinophiles, but he's not an apologist. ''Don't think I have starry eyes about China. It will have a lot of setbacks along the way, as did America. Since the 19th century America's had a horrible civil war, we had 15 depressions, we had periodic massacres in the street and, at times, very few human rights.

''Plato said in The Republic that the way societies revolve is they go from dictatorship to oligarchy, to democracy, to chaos and back to dictatorship.'' China, according to Rogers, is in the early stages of oligarchy. And, America, if it's not careful, is heading for chaos.

Hey, you can listen to guys like Jim Rogers, Ron Paul, Peter Schiff, and Marc Faber ... or keep believing in Bernanke, Obama, Frum, and other political hacks instead. The choice is yours.

Just remember, so is the risk.