INTERNATIONAL. Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers said trying to push the problem out to the future by printing more money isn't going to work.
In a lecture at Oxford University’s Balliol College Thursday, Rogers reiterated his opinion about US Federal Reserve Chairman Ben Bernanke, saying, “all he understands is printing money."
“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers told the audience.
He was referring to Wednesday's Fed annoucement that it will buy an additional US$600 billion of Treasuries through June, expanding record stimulus in a bid to reduce unemployment and avert deflation.
Peter Schiff, President of Euro Pacific Capital, believes there are other reasons behind the Fed's announcement.
"At the end of the day, all the deflation talk is a red herring. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack," Shiff said in his last weekly commentary.
"The true purpose of QE2 is to disguise the decreasing ability of the Treasury to finance its debts," Schiff claims.
"By announcing QE2, it [the fed] can monetize government debt without the markets perceiving a funding problem. If the truth were known, a real panic would ensue. So, the Fed pretends buying treasuries is simply part of its master plan to boost the economy, even though, in reality, it is simply acting as the buyer of last resort," he wrote.
The New York Fed's operational account – where QE2 purchases will be held – already owns 30% of T-bonds maturing between 2014 and 2020.
Two-thirds of the Fed's newly created US$600 billion will be spent on T-bonds maturing between those dates, notes Tracy Alloway at the FT's Alpha blog.
“All he [Dr. Bernanke] understands is printing money,” Rogers said in his Oxford University lecture.
“His whole intellectual career has been based on the study of printing money,” he said. “Give the guy a printing press, he’s going to run it as fast as he can,” Rogers was quoted as saying.
Former Federal Reserve Chairman Alan Greenspan weigh in the debate, commenting on QE2 last night.
Speaking at the foreign-exchange FX10 Conference in New York sponsored by Bloomberg, Greenspan said the US is involved in a "dangerous game" and a "risky strategy."
"When the Greek crisis hit, everything reversed and the flood of money coming into the dollar turned that around," Greespan said referring to the strengthening of the US currency in the May-June period.
"The overall reactions in this market are really telling us that we're involved in a dangerous game," Greenspan said.
I know everyone is saying, let's wait for a couple of years...let's keep the stimulus going...then we'll solve the problem, he added.
"I think it's a very risky stategy," the former fed chairman stressed, adding that If he knew we could do that, then it would obviously be the best strategy. However, "I am not sure the markets will allow him to do that," he concluded.
Rogers outburst in Oxford didn't surprise his many followers as he has been repeating his views on US economic and monetray policy in many appearances on Business TV networks and other events around the world.
"The things that have worked in the past... will be you go bankrupt then you re-organize and you start over. You have a painful period for awhile, and then you start over. This has been done in the past 3-4 thousand years, and that's the way you do it," Rogers said recently.
"Trying to push the problem out to the future, and printing money, we just had another example here in the US, it didn't work and it's not going to work."
With central banks "flooding the world with money," the only place for investors right now is in real assets, such as metals and agricultural products, to protect themselves from central banks debasing currencies, Rogers advises.
"Paper money is not going to do it for you," he tells investors.
Yesterday, he told students in the audience to scrap career plans for Wall Street or the City, London’s financial district, and to study agriculture and mining instead.
Rogers has spent a career being one step ahead of mainstream investment thinking. He rose to fame after co-founding the now-closed Quantum Fund with George Soros nearly four decades ago. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%.