Jim Rogers sees serious problems ahead for the financial market and the economy.
Skyrocketing debts fueled by the major central banks’ liquidity injections, which facilitates the endless monetizing of debt is the crux of Jim Rogers sees serious problems ahead view
In 2008, Jim Rogers noted in his latest interview, that we had problems because of too much debt.
But fast forward and the global debt has reached an unprecedented $188 trillion in 2018. Moreover, governments in advanced economies are showing no signs of reducing this debt level.
In emerging and low income developing countries, the average debt ratio is rising at even a faster rate.
“In 2008, Jim Rogers noted in his latest interview, that we had problems because of too much debt”
Jim Rogers sees serious problems ahead due to the global debt growing exponentially, at a time when the global economy is stuttering
Referring to the post-financial crisis of 2008 Jim Rogers said, “Since then the debt has skyrocketed everywhere, it’s going higher and higher” and he added, “We are going to have a horrible time when this all comes to an end.”
Jim Rogers is renowned for his permabear views. April last year Jim Rogers warned that the day of reckoning will play out in the form of a loss of confidence in the central banking system.
The risk-on trade continues unabated despite the deteriorating geopolitical situation, the rise of popularism which threatens the status quo and a backdrop of weakening macro fundamentals.
So while Jim Rogers sees serious problems central banks continue pumping the market with liquidity. The market’s mindset is that the Fed and its western aligned central banks will save the market with endless liquidity, money creation to finance their balance sheet expansions.
“We are going to have a horrible time when this all comes to an end”
JIM ROGERS (on global debt)
Jim Rogers sees serious problems ahead with long term consequences, particularly when investors are coaxed into this mindset where central banks have their backs covered
Jim Rogers points out that global investors are all assuming that the central banks around the world are going to continue with their coordinate effort of printing money as long as it is necessary.
Moreover, Jim Rogers noted in his recent interview that the Bank of Japan, The European Central Bank, The Bank of England and the Federal Reserve have all indicated their willingness to carry out asset purchases.
“I think we are actually at a point of encouraging risk-taking, and that should give us pause” – Fed Chair Powell
Jim Rogers sees serious problems ahead with endless central bank liquidity
“This is madness we are all going to pay a horrible price someday,” said Jim Rogers. Never before in world history have interest rates been so low for so long, notes Jim Rogers.
In short, Fed fund rates have not been this low in half a century.
Moreover, the achieves of October 2012 FOMC minutes shows the new Fed chair Powell’s concerns over extraordinary monetary easing of low rates and balance sheet expansion.
“I think we are actually at a point of encouraging risk-taking, and that should give us pause” said Fed chair Powell. Nevertheless, the current Fed chair knowing all too well the risks associated with unprecedented easing policy QE and historic low rates continued along the same path for seven more years. The Fed is now growing the balance sheet at a rate of about 100 billion US dollars a month. An attempt was made by Fed chair Powell to transition to normal monetary policy but December’s 2018 stock market crash, the worse monthly fall since the Great Depression, gave the Fed cold feet and emergency monetary policy continues to date.
So Jim Rogers sees serious problems ahead
“All the central banks in the world have driven interest rates to historic lows, negative in some countries. This has never happened in world history. In my view what is going to happen is that the debt is going higher and higher everywhere in the world,” said Jim Rogers.
“Academics and bureaucrats in Washington don’t know what else to do. They are afraid for their jobs and all they know what to do is print money”
– Jim Rogers
“The Fed increased its balance sheet by over 500% in less than a decade. These are astonishing statements and facts. Every day the Japanese central bank prints money and buys ETFs and bonds. These are astonishing statements and facts. This is insanity that is not how sound economic systems are supposed to work” said Jim Rogers.
Indeed, just over the past week, the Fed monetized over 4.1 billion dollars in debt. It is essentially helicopter money for the financial system. What’s more, September’s Repo crisis is evidence that all is not well. The Fed is monetizing debt that the treasury sold days earlier.
Jim Rogers sees serious problems ahead because policymakers are repeating the same mistakes
“Academics and bureaucrats in Washington don’t know what else to do. They are afraid for their jobs and all they know what to do is print money” said Jim Rogers. The Fed chair and POTUS both know that there is a massive asset bubble but neither wants it to burst on their watch.
What is the end game of Jim Rogers sees serious problems ahead view going to look like
Eventually, the market is going to say we don’t want to play this game anymore. We don’t want your garbage paper anymore. When that happens the Fed will do everything they can to control it. They will print, even more, but even more assets. But at that point, the market is going to say we are not going to play anymore. We know your garbage is garbage you are on your own and that is when we have serious problems,” said Jim Rogers.
Regarding the US-China trade war, Jim Rogers said, “nobody wins a trade war, trade wars haven’t been good for anyone. Trump thinks trade wars age good, he can win a trade war, he thinks he is smarter than history”.
Jim Rogers sees serious problems but does he see a recession looming?
“Show me 100 trillion US dollars and I will show you a good time. We will all have a wonderful time until it comes to an end,” he said.