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March 15, 2014 - Freedomain Radio - Stefan Molyneux

22:50

2638 The Crisis is Not Over! A Conversation with Legendary Investor Jim Rogers

Stefan Molyneux speaks with legendary investor Jim Rogers about the future of the world economy, the coming economic shift and how to prepare for the future.

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	Hi everybody, it's Stefan Molyneux from Freedom Main Radio.
	I hope you're doing well.
	I am here with investor extraordinaire, author and ardent motorcyclist, I guess is a fair way to put it.
	James Rutgers, thank you so much for taking the time.
	I'm delighted to be here, Stefan.
	Good morning.
	I guess it's a good evening to you.
	Indeed.
	So, it would appear, you know, just judging from the video, that you have fled the colder climates of North America, and you have relocated to someplace that makes a lot more climate sense, and I would dare to argue economic sense as well.
	Do you feel that you are genuinely fleeing the Titanic, the sinking ship of the Western statist democracies, or is that the idea behind the move?
	Well, I am in the tropics, you're right, you can look behind me and you can see...
	It's bright sunshine here.
	I live in Singapore, which is pretty close to the equator.
	In Singapore, it's always either hot or hot and raining.
	And if it's raining, it's not going to rain long.
	That's not why I'm here, though.
	I'm here because I want my children to grow up speaking Mandarin and knowing Asia.
	In my view, the best preparation I can give them for their 21st century is to know Asia and to speak fluent Mandarin.
	So that's why I'm here.
	It's pretty simple.
	Now, you've pointed out, of course, that China is about, what, one-tenth the size of the U.S. economy.
	But going down the road, you've talked a lot about the death of the U.S. dollar, the rise of emerging economies, particularly China.
	I know you're not quite so bullish on India.
	I mean, this seems like an incomprehensible thing to those who are used to the late Roman Empire of the West, that this could be eclipsed by China.
	But what's your reasoning behind it?
	Well, first, it's not one-tenth the size of the U.S., it's one-tenth the size of the U.S. and Europe.
	But China's done a great job, but still, if you throw in Europe and America and Japan, it's over ten times bigger than the Chinese economy.
	China cannot save us, no matter what.
	No matter what a good job they might or bad job they might or might not do.
	Yes, looking to the future, the U.S. is certainly in decline, certainly relatively if not absolutely.
	The U.S. is the largest debtor nation in the history of the world and the debts are getting bigger and bigger and bigger every day as you well know.
	China in the meantime is the largest credit nation in the world and that's getting bigger and bigger every day.
	I don't like saying it.
	I'm an American citizen, American voter, American taxpayer, but one has to deal with reality or one will not survive.
	I certainly don't like saying that, but look out the window.
	You'll see.
	You'll see that the U.S. is certainly in relative decline.
	I think that's inescapable and tragic.
	But you endorsed Ron Paul for president, I would assume, because too big government, as it always does throughout history, leads to decline in free market transactions and the accumulation of wealth and capital because it scoops up so much and bars so much productive trade.
	At that time, I guess, in endorsing Ron Paul, you must have felt there was some kind of political solution.
	Do you think that is possible for America to turn itself around through politics?
	Well, Ron Paul was one of the few people in Washington who understood what was happening.
	He understood the economy and understood the world.
	Again, I don't like saying it.
	It's a shame that we have over 500,000 people in Washington who don't have a clue about what's going on in the world.
	Yes, there's possibly a political solution.
	It's only going to come after a crisis or a semi-crisis.
	No country in the world has got itself into this kind of position.
	It suddenly just waked up and said, oh, gosh, why don't we change things?
	They only do that after a crisis or a semi-crisis, and the crisis can be a war.
	I mean, in many ways, the countries get slapped in the face and then start to change things.
	But never have I heard of a country which has just said, okay, we've made terrible mistakes for 50 or 60 years.
	Now let's start over.
	Let's bite the bullet and start over.
	It doesn't happen.
	But isn't China an example of one of those countries?
	I mean, they came out of totalitarian dictatorship of communism, and they're starting to, of course, for the last, what, 20, 25 years, they've been heading towards a free market.
	I mean, if they could do it, again, it was easier with a central command and control economy without a dependent population, but they could do it.
	Would you not argue that it could happen in America, too?
	Well, good point.
	A couple of differences.
	China had been in decline for three or four hundred years when Deng Xiaoping in 1978 said, this is not working.
	We've got to try something new.
	But China wasn't a gigantic debtor nation and an overextended nation at that time.
	They were just, you know, poor, undeveloped nation and said, let's try something different.
	That's a little different from, say, the UK in 1918 or the US in 2014.
	It is a good point.
	China did change.
	China did turn itself around.
	And we know the rest of the story.
	Yeah, hopefully we won't need 400 years of dictatorship to provoke that kind of beneficial change in the West.
	That would be another dark ages from which we may not emerge, which would be particularly tragic.
	Now, what is your prescription?
	You know, because in the prescription is usually contained the diagnosis, right?
	So what is your diagnosis of the central problems with the U.S. economy, or I guess Western economies as a whole, and what would your solutions be?
	Well, it's pretty simple to repeat.
	The U.S. is the largest debtor nation in the history of the world.
	The debt's getting higher and higher.
	I mean, there are plenty of other huge debtors in the, quote, developed world.
	We've all had a wonderful...
	30 or 40 years, but it's all been built on debt, and eventually somebody has to pay the piper.
	The U.S. debt has skyrocketed.
	The economy has grown some.
	Let's just look at the last 10 years.
	The economy has grown some in the U.S., but the debt has gone up something like 10 times as much as the economy has grown.
	So, yeah, you give me a trillion dollars and I'll show you a fabulous time, Stefan.
	I mean, that's easy if you're playing with other people's money, but eventually that runs out.
	And I'm not sure when it's going to run out in the US. I would suspect certainly in this decade, if not before, but it's going to end.
	Something you said recently in an interview really struck me, James, which was...
	You said that we've become sort of afraid of failure.
	We've become afraid of banks failing.
	We've become afraid of even entire industries failing.
	And in the past, we used to be a lot more rough and tumble, I would argue, as a culture.
	You know, failure was an acceptable part of life.
	It was an inevitable part of life.
	And now, of course, everyone runs like stuck pigs to the government for bailouts and so on.
	Do you think there's been a big cultural change with regards to...
	Our perception of the value of failure?
	I mean, things that I've failed at in my life have been some of the most instructive things that have ever happened.
	Well, most people do learn from failure.
	I mean, unfortunately, it's the way a lot of us have to learn things.
	I would prefer not to have to learn that way, but you're right.
	Some of the most instructive things are when you fail and you have to deal with the failure.
	The way the system is supposed to work and the way it's worked for Most of American history, most of world history is that when people fail, competent people come in, take over the assets, reorganize and start over.
	What we're doing in America and some other countries as well is taking the assets away from the competent people and giving them to the incompetent people.
	And saying now you compete with the competent people with their assets, with their money.
	This is hopeless morality.
	Not that politicians care about morality, but it's also bad economics as Japan has proved.
	You know, they did this in the early 90s and they've had two lost decades and they're into their third lost decade.
	Yeah, with catastrophic effects on things like birth rates and entrepreneurial spirits and so on, it's wretched, I think.
	And no way of turning it around immediately, it seems.
	Didn't they just commit to printing as much money as they could?
	What is it you said?
	They'll stop printing money when they run out of trees?
	Yeah, that's what's going on in Japan.
	But not just Japan, many countries do right now.
	And this has all been in very, very badly.
	Right.
	Now, you've talked a lot about how the financial sector of the economy you don't think has a very rosy future and that the meek and the farmers shall inherit the earth.
	What are your arguments behind that?
	Because it seems like that's the place to be if you want to make a lot of money these days.
	Well, it certainly has been for the last year or so.
	Again, because of all the money which is being printed, it certainly is not true of the past 10 or 12 years.
	As you probably know, it's not that easy getting a job in finance these days.
	The people who have held on and many people have lost their jobs in finance in the last decade or so.
	In my view, it's not going to be easy going forward.
	We've had long periods in history when the financial types were in charge, followed by long periods when the producers of real goods were in charge, and then followed again by the financial types.
	The 50s and 60s and 70s on Wall Street in the city of London, they were backwaters.
	They were wastelands.
	Then we had the Great Bull Market in the 80s, 90s, etc.
	In 1958 in America, 5,000 people got an MBA. Nobody in the rest of the world got an MBA. Last year, 200,000 in America got the MBAs and tens of thousands in other parts of the world.
	So now you have a huge glut of competition at a time when the investment world, the financial world, is hugely leveraged.
	In the 60s or 70s, there was virtually no leverage in the financial community.
	Now there's staggering leverage, and it's a time when governments don't like us.
	Every time you turn around, there's a new regulation or control or tax on financial types.
	So you have gone from No competition, no leverage, and being loved by politicians to being despised by politicians.
	Huge leverage and massive competition.
	That's not the prescription for good times.
	Yes, some people do extremely well.
	Some people in the 50s, 60s, and 70s made fortunes in finance, but it's not going to be easy.
	The wind is in your face now, not at your back.
	Contrast that with flying, for instance.
	More people in America study public relations and study agriculture.
	The average age of farmers in America is 58.
	In Japan, it's 66, etc., etc.
	Farmers are dying and retiring.
	There are no young people coming in, and agriculture has got to be a great place, or we're not going to have any food at any price.
	If agriculture doesn't become exciting, we're not going to have any farmers, we're not going to have any food, and we're going to have a pretty dismal world.
	What is more likely to happen is agricultural prices will go up, farming will become an exciting place to work, and guys will see the farmers driving Lamborghinis, and they will say, the stockbrokers are driving tractors, the farmers are driving Lamborghinis, let me go work on the farm.
	And you'll have another shift.
	It's happened throughout history.
	There's nothing unusual about it, except people forget.
	They don't read their history.
	They think that the world started the day they got out of college.
	Unfortunately, they didn't say they got out of college.
	The world's been going on for centuries.
	Well, and of course, the government and the associated hangers-on and lobbyists are all working as best as they can to prevent change.
	You know, everybody who's at the top who's making all the money wants to glue the Lego pieces together, so to speak, so that nothing changes.
	You can stave that off, but then when the dam breaks, isn't it usually all the worse?
	Well, that's why in 2008, when the dam started breaking, they all called, you know, Washington.
	The plumbers in Oklahoma called Washington, but nobody paid any attention.
	But when the head of the major banks on Wall Street called Washington, they take the call.
	The Federal Reserve takes the call.
	And the Secretary of the Treasury takes the call.
	And they said, you've got to save us at the end of Western civilization.
	Well, you know, what do they know?
	They're bureaucrats, most of them.
	So they took the call.
	They said, We got to save western civilization which meant we got to save the big banks on Wall Street and they did it.
	They bailed out the incompetent people who should have failed to let new people come along and rise.
	We know the rest of the story.
	That's one reason the debt has gone through the roof.
	It's very interesting that today the new head of the banking regulation in Europe To my astonishment, he said, you know, we've got to let people fail if things go wrong.
	Now, that is mind-boggling to me, who's been watching all this for a few years.
	Suddenly, the Europeans are saying, well, let them fail.
	Let them fail.
	It won't be the end of the world.
	It'll be good for the world.
	But in America, we don't play that way.
	We don't want to let them fail, unless it's somebody who isn't so significant.
	We don't mind them failing.
	But if our contributors and friends fail, we have to bail them out.
	Well, of course, we have to have sympathy for the politicians.
	It's much harder for them to get campaign contributions from a lot of smaller companies when they can get campaign contributions from the heads of some very large companies.
	It's less travel for them, less parties.
	You know, it's very, very concentrated and efficient.
	So, obviously, our heart goes out to whatever we can do to make political campaign funding and fundraising easier.
	I think we're all in the same boat.
	The charity for that is open-hearted, warm, and wonderful, and Savagely is going to take us all down with it.
	Now, most of the people that I talk to in the investment world are stock and bond people, but you are bullish on commodity trading.
	I wonder if you could talk a little bit about that.
	Most of my listeners are less familiar with that and why you think it's not as terrifying as some people think.
	Well, I own stocks.
	I'm short bonds.
	I invest in everything.
	Currencies, the whole works.
	I happen to be optimistic.
	We just talked about agriculture, for instance.
	I'm very optimistic about agricultural products for the reasons I mentioned before.
	And we all know What agriculture is, every one of us knows what sugar and wheat and copper.
	We know what this stuff is, gasoline.
	None of us have a clue about Toyota or IBM. The chairman of IBM cannot fully understand IBM. He's got tens of thousands of employees, products, competitors, etc.
	Governments to deal with.
	Cotton is pretty simple.
	Either too much cotton or too little cotton.
	Now, that doesn't mean it's easy.
	It doesn't mean it's easy at all to figure out whether there's too much or too little, but it's a lot easier to do that than it is to figure out what's going to happen to IBM or Toyota or some of the major companies in the world, or even bonds for that matter.
	So, I've said to you before that agriculture prices have been going down for 30 years, On an absolute and a relative basis.
	So agriculture, either we're not going to have any food or the price of agriculture is going to go up.
	I happen to think it's going to go up, so I own agricultural products.
	There are many ways to play.
	You can buy shares in agricultural countries.
	You can buy seed companies.
	There are many ways to play.
	But for me, the best way to play is to own the stuff itself.
	Right, right.
	One thing that you wrote about that really struck me was you said that basically when you first learned about markets and investing, I think I've only heard that kind of prose for somebody who's fallen in love with a beautiful woman.
	Why do you think it was so attractive for you?
	And why did it become such a passion for you?
	Was it the first time you saw it or did it grow on you?
	Was there somebody who inspired you?
	How did that come about?
	Well, I'd always had a huge interest in the world and what was going on in the world.
	That was my main passion.
	I knew nothing about Wall Street.
	I knew it was in New York somewhere.
	I knew something bad happened in 1929.
	But that's all I knew.
	I didn't know there wasn't a difference in a stock and a bond back in those days.
	But then I went down there by accident and got this job and I suddenly realized, hey, they'll pay me and they'll pay me a lot of money to understand the world and know what's going on in the world.
	So it was instant love.
	This was what I'd been looking for.
	I didn't know there was a job that would pay me, that would reward my passion.
	I found one and been there ever since.
	Yeah, it struck me.
	It is, I think, one of the basic things that all civilized people need to know is something about the market.
	I mean, I don't have to know a lot about how to sail a ship because I'm not over an ocean at any particular time in my life or far out from land.
	But we all live in this economy and we all vote and we all navigate this.
	And I think to understand this, and Lord knows the government schools aren't going to teach us a whole lot about it, but I think there's a really good case to be made that it is, you know, like some basic literature, some Bible, some Shakespeare.
	It has to be in the library of every reasonably intelligent, civilized person to know something about this market that dominates and dictates so much of our decisions and lives.
	Well, of course.
	I mean, we all, if nothing else, we go to the grocery store.
	We drive fuel.
	We do everything.
	The more you know about it, obviously, the better you're going to be able to navigate It doesn't mean you have to become a professional investor or professional financial type.
	It's better if you know what's going on than if you don't know what's going on because you're going to get blindsided month after month if you don't know what's going on.
	Now, of course, you became a father quite, I guess, somewhat recently, and you've written a lot about how you want to help prepare your daughters.
	I think they're both daughters for the future.
	I'm a relatively new father.
	My daughter is five.
	And so, of course, like all fathers, I'm concerned about the future and trying to think of the best ways to help prepare her.
	And I know you've got a book out about this at the moment, but I wonder if you could share with my listeners some of the things that you think are helpful for parents to try and get into the heads of their children.
	Well, I'm trying to teach my children to think for themselves, to be independent, not to believe the stuff that they are fed, whether in school or the media, whatever.
	I want them to be curious and skeptical.
	I'm trying to teach them to beware of the boys, because, you know, the boys are not going to be good for them, at least not for a while.
	But mainly think for yourself, be skeptical, be curious.
	I want them to be curious about the world.
	And if I can teach them that, And, of course, to find their passions and follow their passions.
	If I can teach them that, then they're set.
	Well, that's wonderful.
	And I certainly appreciate that you're sharing your travel experiences and your experience of different cultures and your experiences as parents because money is a part of life.
	Family and offspring are a huge part of life.
	So I certainly thank you for sharing all of your thoughts.
	About that, and I guess if we can close with something that may make you quite passionate, I guess we have a new Federal Reserve Chairman, Yellen.
	Do you have any thoughts about her, any predictions about where she's going to head?
	Do you think this thing's going to taper down, or what?
	It's the same stuff.
	I mean, Mrs.
	Yellen, I'm sure, is a wonderful person, but she's been part of this whole madness that's been going on.
	Not as though she suddenly fell into Mars and started looking around.
	Let's look at this situation with a new eye.
	She's part of it.
	She's part of the reason we have this madness going on.
	No, it's not going to change.
	What's going to happen though is eventually the markets are going to get scared and go down a lot.
	Then Mr.
	Yellen is going to panic and say, oh gosh, I'm sorry, and they'll stop, they'll reverse, they'll certainly stop if nothing else, and the markets will breathe a sigh of relief and they'll rally.
	You've got to remember, all these people are academics and bureaucrats.
	They never had a real job.
	They can't get a real job.
	That's why they work for the government.
	So it's going to end in a disaster.
	She doesn't understand any more than Greenspan or Bernanke did.
	Well, and I think that...
	No, go ahead.
	Sorry.
	I was going to say, she helped teach them.
	All of them are sitting down there together saying the same things to each other, and she's part of it.
	Right.
	Yeah, and it certainly is alarming.
	I mean, whether there's going to be a soft default or a hard default, the basic reality is what mathematically cannot continue will not continue.
	And the CBO projections recently with Obamacare and Social Security and Medicare and Medicaid is that, you know, even the government says it's bad and the government is always putting a positive spin on things.
	Look, the situation is getting worse.
	You should be worried, be careful, and be prepared because...
	It's not going to be fun when it ends.
	Yeah, and when people see you being interviewed in the future, at some point they may see me just sort of over your right shoulder doing some agriculture in this lovely garden that you have, which I think, given the climate and that I'm stuck in minus 20, seems like a pretty good opportunity.
	Well, if you don't know how to drive a track, I urge you to go and learn, because it's going to be important in your lifetime.
	Well, I appreciate that.
	And thanks so much, James.
	You can go to JimRogers.com to look into more of his books.
	Hugely recommended.
	Thank you for everything you're doing to educate a somewhat docile planet on some very important stuff.
	And certainly, thank you for your time this morning.
	I've really enjoyed the conversation.
	Thank you, Stephen.
	I'll see you again sometime.
	Thanks.

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