‘I have gold, silver, sugar in my pocket’

Jim Rogers, author, traveller and commodity evangelist, does not have a high opinion of policy makers in the United States.

Sample this: President Barack Obama is charismatic but lacks the experience needed to handle economic upheavels.

And another: Federal Reserve chairman Ben Bernanke’s reckless production of dollars carries the risk of large-scale deforestation.
Problems caused by too much debt and consumption cannot be solved by taking  even more debt and consumption, Rogers said, while speaking at ‘Vision 2015’, an event in Mumbai. Stating that he had more faith in the Reserve Bank of India than in the Federal Reserve, he reiterated that the Indian central bank has done a better job of managing its economy.

In his typically frank and common-sensical way, Rogers said any solution that banks on pumping of large amounts of liquidity by central banks  into the global economy  is unsustainable and wondered what would happen if the current recovery begins to falter.

“What’s Bernanke going to do, print more money? The world would run out of trees,” he said.

While the Reserve Bank of India has done a much better job than the central banks of some developed countries, he said, others too are doing commendable work.

“Nowadays the ECB (European Central Bank) is doing a much better job as well as are central banks in Australia and Norway,” he said.

The ECB has been grappling with the possibilities of sovereign defaults in the European Union and responded with low interest rates and aggressively buying sovereign and corporate bonds.
Australia was the first of the major economies to raise its interest rates in October 2009, while Norway was the first European nation to do so, also in October 2009.

Nevertheless, he still believes that India could do some things differently. “I don’t know why India has capital controls in 2010. Countries with open currencies are likely to develop better. Nobody wants to invest in a country if they run the risk of that investment being trapped,” he said.

This is an issue that India shares with China, which also does not have a convertible currency, he said. The Chinese have indicated willingness to have a more open economy, suggesting  that  exchange rates, which have been pegged to the dollar, may be allowed to be more flexible.

Among other major global currencies he is not bullish on the either the dollar or the euro, with the latter not expected to be around in ten years.    

The US (United States) is not just the world’s biggest debtor nation, it is the largest debtor in history.

The world needs a replacement to the US dollar, he said.
While the euro sounds like a good replacement-it is spread out over a larger population and a large number of countries- the problem is that it is deeply political, which makes it difficult to be positive on it.

With all the global uncertainity, he still believes in putting his money in real assets.  “I have gold, silver and sugar in my pocket,” he said.

He is long commodities and short stocks, though the latter does not apply to India as much as the United States.