Thursday, December 8, 2011
Jim Rogers: US Falling Into 'Deeper Trouble,' Faces 2013 Depression
President Barack Obama has tried to spend the economy back into recovery, which never helps, Rogers told Newsmax.TV in an exclusive interview.
When an economy falls into a recession, which normally happens once every four to six years, it needs to run its course, which is painful but healthy in the long run.
Spending money via stimulus packages or through ultra-loose monetary policies resuscitates the economy but not for long and makes the day of reckoning even more painful when it arrives.
"We are talking about serious unemployment, we're talking about more losses, we're talking about more bankruptcies. Potentially a depression? Yes, of course, potentially a depression," Rogers says.
"In America we have had recessions every four to six years since the beginning of the Republic. So by 2012 or 2013, we're going to have another one, and it's going to be much, much worse. Whether that's a depression or not I don't know but be very careful because America is getting deeper and deeper into trouble," he said.
What can the government do? Reverse the spending policies of the Obama administration, he says.
"We cannot quadruple our debt every four or five years. We cannot print staggering amounts of money every four or five years. So there's going to come time when we've shot all of our bullets, and it's going to be a big mess."
On top of hundreds of billions of dollars in stimulus measures the administration has rolled out, the Federal Reserve has pumped $2.3 trillion into the economy via quantitative easing, which are asset purchase from banks that critics describe as printed money with little backing that in the end threatens to push up inflation rates.
Government intervention won't work here as it hasn't elsewhere.
Japan refused to let troubled financial institutions go under in the early 1990s and as a result, spent two decades mired in sluggish recovery.
Scandinavia took the opposite approach when it ran into an economic downturn and today is healthy, Rogers points out.
The world's Central Banks recently launched a coordinated effort to make it easier for European banks to gain access to dollars, a move that seeks to stave off a credit crunch.
That's not going to work either, Rogers says.
"It's not going to solve the problem. What politicians try to do always is get to the other side of the next election. This is just going to delay the problem and make it worse in the end. It's going to make it worse because there is going to be higher inflation, higher interest rates, more currency turmoil and we're going to have a lot more problems."
In the U.S., voters go to the poll in 2012 to elect a president, and they aren't going to be happy.
"Unemployment is still higher than it was back in 2008 when Mr. Obama came to become the president. So the idea that got out of that first recession, to me, is a little bit laughable. We're still having serious problems," Rogers says.
Watch out for election-year spending, which may boost markets somewhat but the underlying problems facing the U.S. economy such as a massive debt overhang won't go away.
"The only thing that might be better is that the there is an election coming in November of 2012 and in the meantime Mr. Obama and his friends are going to spend all of the money they can trying to get reelected. So all of those people are going to feel a lot better and they are going to spread a whole lot of money around, but be careful about 2013, because 2013 is going to be a mess."