Jim Rogers on the U.S. debt crisis

The term “legendary investor” sometimes gets tossed around loosely. In the case of Jim Rogers, the title “legendary investor” is entirely appropriate.

In an interview with Maria Bartiromo on CNBC last week, Jim Rogers talked about commodities, currencies, equities, the economy, the decline of the dollar, the ascendency of the yuan, China, precious metals, QE2, QE3, Bernanke, printing money, and a lot more.

Have a look — Jim Rogers: US Debt a Crisis in the Making - CNBC

scary but i think he’s right.

Jim is the best!

Economies need to go back to basics, Tax & Spend, keep it simple, borrowing should be minimal, and only for a purpose, i.e. for projects not for sustaining the current balances.

Everywhere you look, everything is unsustainable, The US economy after 30+ years of mis management is unsustainable, most European countries are unsustainable, China is unsustainable because of it’s burgeoning population, and so to is India. Australia may well just about be sustainable on current form and possibly Russia if they get their act together.

But another 10 years on our current course will really start to spell major disasters.

An excellent article by Barbara Rockefeller in the June issue of [I][B]Currency Trader[/B][/I] magazine ties in with Jim Rogers’ prediction regarding the dollar.

Here are five paragraphs from Barbara’s article [B]Be careful what you wish for: The reserve currency dilemma[/B].

Is the dollar doomed as a reserve currency? Yes, because it is the inherent nature of the beast. Every reserve currency fails in the end. This is a hard thing to accept, but it’s even harder to imagine exactly how the global economy will weather the storm.

While market observers and investors bemoan dollar weakness, we tend to lose sight of the inconvenient fact that reserve currencies are the fall-guy for conditions outside anyone’s control, least of all the reserve currency issuer itself. In fact, economists have known the dollar was doomed from the moment the Bretton Woods agreement was signed in 1944.

The inevitable decline and fall of the dollar is due to something called the Triffin Dilemma…the reserve currency issuer has a duty to supply larger amounts of liquidity to the world market than optimum domestic policies call for, thus running a current-account deficit.

It is the very nature of a reserve currency to fall in value, whether rates are fixed or floating, because it is the reserve currency that facilitates global growth. The only way for the reserve currency not to devalue is for every international participant to embrace much slower rates of growth and global trade far reduced from today’s standards.

So, with all due respect to the World Bank and the IMF, and to critics who long for a totally impossible return to the gold standard, we are stuck with the dollar, and yes, it is likely to continue a long-term secular downtrend unless and until the U.S. reverses from a severe deficit condition to surpluses, whereupon there will be a dollar shortage and the cycle begins anew.

That’s a small portion of a very long article, but one well worth your time to read.

[I][B]Currency Trader[/B][/I] magazine is not readable online — you have to download it. To do that, you have to be a subscriber — which is free and painless — so, if you don’t already subscribe to [I][B]Currency Trader,[/B][/I] you should take care of that chore right now, right here:

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In fact, the usd devalued around 98% in the last 100 years against the only real currency: Gold.

The usd is a fiat paper money. If you understand how that works and how banks create money, you know that it is not even real money. Every fiat currency is a debt paper. If a 20 dollar note is printed or if it is electronically created, it increases debt, not value. As nobody, not even the cb lends you that debt paper without asking for interest, there is an inherent default constructed into every fiat currency. Because nobody than the cb can create money and thus the interest can’t paid back all together. It’s like a pyramid system. The more “money” exists, the more debt existst and the more interest exists and the higher is the risk that it will all burst, because in the end the interest can’t be paid. In result, no fiat currency is a good value saver.

But all money is debt money, normally a currency note says ‘I promise to pay the bearer’.