Legendary investor Jim Rogers sat down with Business Insider CEO Henry Blodget on this week’s episode of The Bottom Line. Rogers goes after the Fed. He says the Fed is clueless and is setting the US up for disaster. Following is a transcript of the video.
Blodget: We will have to move there I think for that to happen. We’re in one of the longest expansions we’ve ever had. Any sign of a recession?
Rogers: In the US?
Blodget: In the US.
Rogers: I don’t see one at the moment. But the problem is that they always come when you’re not expecting them. I would suspect by the end of this year or next, it’s going to start somewhere we’re not watching it, whether it’s the Illinois pension plan or Madagascar. Who knows? It’s going to start somewhere. And then we’ll know. But if you look out the window now, everything’s great and that’s a dangerous sign.
Blodget: Exactly. Is the Fed doing the right thing?
Rogers: No. Oh, Henry, you’re bad for my nervous system. I’m going to have a seizure right here on Business Insider. They have no clue what they’re doing. They have driven interest rates to the lowest in recorded history and every other central bank in the world has followed them. Interest rates are negative in many parts of the world, as you know. This has never happened in recorded history and it hasn’t worked and going to end very, very, very badly.
Blodget: So what should they be doing then?
Rogers: First of all, they should resign.
Blodget: Just disband themselves?
Rogers: Well, they should abolish the Fed and then resign. Yes. In America, we’ve had three central banks. The first two disappeared for a variety of reasons. The world can get along without a central bank. Now the world without central banks has a problem but the world with central banks, with the central bank has a problem. Yeah, we’d be better off without this central bank. This central bank now has $US5 trillion of debt. It’s built its assets from $US800 billion to $US5 trillion. That’s trillion with a ‘t.” It’s gone up five or six times in, what’s that, nine years. No. These guys are — they’re setting us up for a horrible, horrible disaster. I told you, it’s going to be the worst in my lifetime, largely because of the central bank in the US and the others who have followed. What they should do — they’re not going to resign, they’re not going to abolish it. They should let interest rates — they should move out of the interest rate market. Their mandate was to have a sound currency. That was the mandate for 60 years or something. And they said, ‘You must also have good employment.’ So they have two mandates. Nowhere does their mandate say, ‘And keep the stock market up and keep the bond market up.’ Nowhere does it say that. And these guys, if they went back to their old mandate of a sound currency, then we’d all be better off.
Blodget: In your investing life, as you have gained more experience, gotten older and made more bets, have you become more sure of your view of the world or less sure?
Rogers: Well, I’ve made so many mistakes in my life that I can never be more sure. So I make many, many, many mistakes but I’m old enough and experienced enough to know I have to doubt myself for everything I do. If anything, I’ve probably become more self-doubting rather than more and more confident.
Blodget: But you seem very confident that we are headed for disaster.
Rogers: Yeah. Aren’t you? You haven’t been watching Business Insider.
Blodget: I have been too cautious for too long. It’s been four years now that the market has been extraordinarily expensive. It just keeps getting more expensive. Things that seem like they’re headed for disaster somehow work themselves out. Everyone’s optimistic. Nobody seems to be paying attention to what’s going on —
Rogers: That is clearly correct. Every word you just said is correct. But now, it’s nearly nine years. It’s the second longest expansion in recorded history in America. So we’re getting towards the end. You were a little early but that’s why you built this big company. Because you had to be cautious and you were wise.
Blodget: Jim, it’s wonderful to have you.
Rogers: My delight.