Jim Rogers: Trade Wars Always Lead to Real War

Thu, Oct 6, 2011 - 6:28am

Successful investor and author, Jim Rogers, warns that a trade war could lead to a repeat of the Great Depression along with a war between the U.S. and China. He's also bullish on the US dollar.

On ramifications of a US-China trade war:

“This could be terribly, terribly dangerous if we turn into a trade war. We had a trade war in the 1930s, it led to the Great Depression. We already have small signs of trade wars breaking out: Brazil, France, other places, now America. This could be very dangerous in the end.”

“If it turns into a trade war it is the most momentous thing of 2011. Trade wars always lead to wars.”

“If America does put on tariffs onto the Chinese, the Chinese have various weapons at their disposal. They could stop buying American government bonds. They could sell American government bonds. If they did that, interest rates in America would go through the roof. The value of the US Dollar would go down a lot (perhaps a lot or, at least, a little). This would not be good for anybody, including for China. But, what happens Lauren is whenever people get slapped in the face, they always have to slap back.”

Bullish on the US dollar:

“I own the US dollar…one reason it hasn’t [collapsed] is because, first of all, there are so many people who sold the dollar and all of a sudden people find themselves too short the dollar and so they got bring some of it back in. Second, there’s chaos in the rest of the world too and many people wrongly, in my view, wrongly, flee to the US dollar as a safe haven. I own it. I don’t own it as a safe haven. I own because I just assume everybody else is going to run there. It can go much higher for a while.”

“I have found in my career, that when everyone is on one side of the boat, Lauren, that you should go to the other side for a while. So I buy US dollars because of the pessimism.”

On the debt problem:

“The facts show that there’s a very very serious problem. The U.S. is the worst—we’re the largest debtor nation in the history of the world. But many European nations have a problem. The world has run up huge huge debts in the past 40 or 50 years. We’re gonna have to pay the piper and we’re paying them now. Bill [Gross] happens to be exactly right. The world’s got some serious serious problems facing it and I don’t know how it’s—I know how it should be resolved—but I’m afraid it’s not gonna be resolved without more pain and more suffering.”

Who will go first: the U.S. or Europe?

“It’s more likely to be in Europe because they’re right there with a lot of attention on them right now. But, as I said before, the U.S. is in worse shape. The U.S. as a whole is the largest debtor nation in history and we have a lot of independent states—Illinois, California, New York, just to name a few—which are in very dire straits just like Greece, Portugal, and Ireland. So, all of us in the West have serious problems."

On the U.S. being more like China and having less democracy to speed up things:

"You always have the danger that they [governments] make the wrong decisions. It just so happens that China made the right decisions—mainly made the right decisions—in the past 30 years. Singapore, where I live, has made brilliant decisions for 40 years. But suppose you have guys making the wrong decisions. Then it’s disaster. Then it’s North Korea. Then it’s Cuba. I don’t want to live in Cuba. I don’t want to live in North Korea, where the decisions have been even worse. You need someone with enlightenment to see the problems and do it. Unfortunately, we don’t have many of those people in Washington D.C. anymore."

"I don’t trust many politicians anywhere Lauren…if I haven’t made myself clear, let me say again: a pox on all of their houses! Most politicians are worried about the next election than anything else. Lauren, the studies show that the good politicians, at least in the U.S., were people who were very good at playground when they were in school. Well, that’s who we now have running things. They’re good at playground but they’re not good at figuring out how to solve real problems."

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