Jason Hartman is joined by Jim Rogers, who is returning to the show a second time, to talk about Jim’s thoughts on several issues. Jim discusses the possibility of a major correction in the gold market, cautioning that it is not normal to have so many speculators rushing in right now. He gives his opinion on Fannie Mae and Freddie Mac, stating that eventually Congress may have to get rid of them and he doesn’t see how they can continue to survive. Jim gives his insights on real estate markets and the possible ramifications and benefits if Fannie and Freddie were gone. He also talks about the direction of home-building, and his opinion of the so-called “recovery” in our country, noting that certain sectors are doing quite well. For more details, visit: www.JasonHartman.com/podcast.
Female Voice: Welcome to Creating Wealth with Jason Hartman. During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness then you ever thought possible. Jason is a genuine, self made multi-millionaire who not only talks the talk but walks the walk.
He’s been a successful investor for twenty years and currently owns properties in eleven states and seventeen cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman: Welcome to the Creating Wealth Show. This is your host, Jason Hartman. This is episode number 307. And thanks for joining me today. So today we’ve got the very famous and very incredible, actually Jim Rogers on the show and we will be with him after a short segment from one of our Meet the Masters events. It’s not the last one. I believe it was the one before that, where we talk a little bit about strengths, opportunities and weaknesses of real estate investing.
I know we did a little bit on that before, but I thought I — I just wanted to come and play clip for you from that Meet the Masters event that we had about a year ago, I believe it was. So, we will be back with that in just a moment, but wanted to also remind you to be sure and register for our Memphis property tour and Creating Wealth in Today’s Economy Boot Camp, that’s coming up at the end of April. So, just a little over a month away, and be sure to get your tickets at the early bird prices. And tickets have been selling nicely in spite of our website problems, which we are continuing to experience.
We talked to the developer today and our web developer says they’ll be all fixed by the end of business on Tuesday of next week. So, thanks for bearing with us through that and we will get through it. It looks like we’ve discovered the problems and you know these computers and these websites, you can’t just leave them alone.
It — it would be so nice if you could just let them work once they’re set up and they’re working. If you can just leave them alone, they require just like an automobile or anything else in life, they require constant maintenance and constant updating and when you update one thing and not the other, then you have conflicting problems with different parts of the site, different plug ins that you use, different programs and so forth.
So — anyway, enough of that. It’s been really frustrating for the past week and a half and we should be in the clear hopefully by early next week. So, thanks for bearing with us there. And gosh, one more commentary on what’s going on in the world, and that is Cyprus.
What’s happening now is Cyprus, the little country off of Italy in Europe. is nothing short of amazingly scary. It is a dangerous time in the world to be a capitalist, and I’m sure you’ve heard about it. We’ll try to talk a little bit more about it on the next show, but people went to sleep with money in the bank and they woke up to proposed legislation that has apparently been put on hold, but I’m still thinking it’s going in this direction although I haven’t followed the story today and it could have gone either way today, I’m not sure yet, that their bank deposits, say wealth tax if you will, something Obama has wanted to do, will be taxed at a rate of somewhere between six and nine percent depending on how much money you have on deposit in the bank.
Now of course we know better, we know that the government can do this anyway in collusion with the central bank of any country, but especially our federal reserve because they can just inflate the value of your money anyway. But this was just an outright tax, pretty scary stuff. We’ll see what happens as that story unfolds and I’ll be back to report on it probably on the next episode, on episode number 308. But without further adieu, I’ve just got a little time with you today for that monologue portion.
Let’s go to the swot discussion at our Meet the Masters event about a year ago, and then we will go to famous Jim Rogers talking about China and America and coming to us today from Singapore.
By the way, I apologize a little bit in advance for the sound quality of that interview. It’s not up to our standards, but Jim Rogers is such a famous guest and — and such an important person in chronicling the economic disaster that we are turning into opportunity, we are making lemon aid out of lemons because we are no longer optimists, but we are opportunists, and of course there are lots of opportunities with what’s going on today in the world. So, here we go. We will be back with those two things in just a moment.
Jason Hartman: Let me just talk about — this is like a little short, quick little vignette then we’ll take a break, and then we’ll have our next speaker and we’ll talk about self directed IRAs.
Have you ever done a swot analysis? Do you know what this is? This is a great thing. S-w-o-t and I learned this about ten — twelve years ago in young entrepreneur’s organization. I never heard of the swot analysis before that. And you can do this on income property. You can do this on your career. I — I recommend you do it on your career. You can do it on your relationships, okay. You can use it in all sorts of things. It’s — it’s really pretty cool. You can do it on your health, for all sorts of things.
So I thought you know, why not do a swot analysis with our investment philosophy? In other words, what are the strengths, weaknesses, opportunities and threats, s-w-o-t when it comes to investing the way we recommend you invest. So strengths are internal things and of course strength is a positive thing. Weaknesses are internal but negative and then the other two come from the outside. Okay, so there’s internal things like our state of mind, our own mathematics of our portfolio. Then there are external threats like competition, government regulation, economics, things that can change. They’re outside of our control, right. And so opportunities are external and positive. Threats are external and negative.
So, you can kind of see the way this matrix works and what it brings you to depending on how waited we are in any one area, right. So strengths, when it comes to investing the way we recommend it are of course you have cash flow, you have fragmented — a fragmented market place and that goes back to the Warren Buffet comment, right. I’d buy a million single family homes if I could figure out a way to manage them. I’m so glad you can’t, Warren, okay because your — your boys you know — in your institutional Wall Street world and at Goldman Sachs and so forth probably aren’t going to be able to get into our business and if they try, they’re probably not going to have a good experience because it’s too fragmented. That’s a strength for us.
Push appreciation, in other words you can create value. How do you create value in income properties? One way is you buy below the cost of construction or replacement, and that means you have what — what is the phrase that we created? Oh, we should be playing Jeopardy right now. You should know this. Regression to replacement cost. So, that’s a way we can push appreciation, but there’s another way. You can do this more so on multi family — on larger projects, where you can add value like I was talking about yesterday, and you can change the economics of the project and the return on it. And you know, it’s a physical asset, it’s tangible, you know, you can kick the tires. It’s real — it’s something real, and one of the things Doug was mentioning when he spoke earlier is, he talked about how I like low tech — I like investing in low tech commodity type items because when you look at the sticks and bricks, that create a house, right these are all simple products, copper, wire, glass, steel, concrete, lumber, petroleum products and all the energy to refine all those products, bring them to a job site and assemble them, right. Those are low tech things, and the key word there with low tech things is unlike high tech things, they’re far less susceptible to a key terms here you may have heard before, disruptive technologies, disruptive technologies.
So, in high tech world, disruptive technologies rule the day because if you have this laptop computer, the next one you buy is going to be phenomenally better and cheaper and someone’s going to always be discovering another way to do it.
But until the time that we all like come home, and this is even beyond the error of the Jetsons — until the time that we all come home and like live in a force field instead of a sticks and bricks house, I don’t know how disruptive the technology could be. I mean, are they going to make a two by four cheaper? Probably, it’s going to get a lot more expensive as we diminish resources from the world and we have you know, more people entering the middle class around the planet and rising up out of poverty, that’s the word I’m looking for, they’re consuming more assets. And so all of these commodities, all of these sticks and bricks that build a house, are in more and more demand, okay. And this is a great thing.
You know — what was it? It was Oct — it was on — halloween was the — I mean, they don’t know exactly, but the experts picked the date. Halloween last year, was the scary day. We — we toped the seven billion people mark. Seven billion people, and you know it’s interesting, because I was a listening to a — a CD on the way out here, a great book by Alvin Toffler. I like futurist books a lot. Alvin and Heidi Toffler, they’ve written several books about the future, Future Shock, The Third Wave, anyway, this one’s called Revolutionary Wealth and I think the copy right date was 2004, and they were talking about how we just hit six billion people. And I’m thinking, wow, it’s only been a few years and now we’re at seven billion. All of those people have a few common needs, food, clothing and shelter. So, they’re going to use more of these commodities and these commodities are not very susceptible to disruptive technologies, in my opinion. I just don’t know how they’re going to make like concrete much cheaper or glass much cheaper or two by four’s much cheaper or brick much cheaper or any of those things. They’re not integrated chips with Intel inside. They’re non-susceptible for things like that.
So, that physical asset — commodity type asset that we’re — we’re dealing with here, it’s just great because it’s — it’s simple. And sometimes the simplest things are the best things. Weaknesses, well properties are susceptible to breaking, right? They have repairs, they have vacancy losses and yesterday we talked about the difference between physical vacancy and economic vacancy, right, so they have vacancy losses which can disrupt your income. Management problems, you know, you can have problems with property managers and I — I have like a love/hate relationship with property managers. Sometimes property managers will rip you off, but the amount of damage they can do in terms of the potential for ripping you off is so much less than a pooled asset like a Wall Street asset.
They may puff up the bill on the garbage disposal or something like that but you know, these are the things you can control, okay. There’s no perfect investment. There’s no investment where somebody doesn’t have their hand in the cookie jar a little bit. You know, just deal with it. Okay, it’s just part of life, it’s part of human nature, but the amount of damage a manager can do is relatively small compared to other investment choices.
Oh, is the question I think we need to ask ourselves is this, and write this down. This is a good question. Compared to what? That’s the question. Compared to what? Real estate’s not perfect. Income property’s not perfect, but compared to what? I mean, what else are you going to do that’s better?
The only other way that you’re going to create substantial wealth potentially, is to have a business of your own that takes off. So you know, I really wish I would have thought of Facebook, but I didn’t. Anybody could have done that, probably. It wasn’t exactly a complicated idea, but they’ve executed on it beautifully, but the simple way is just to own these little income properties. It’s just not too complicated.
Natural disasters — now natural disasters actually could be a strength and not — actually an opportunity, we’ll call that because it’s external, but natural disasters could be a great thing. And at lunch I was telling a couple of people about how that apartment building in — in Scottsdale, Arizona that we bought — and Zack, you know about this one, we acquired this property and had an insurance claim from the hail storm a year earlier that we didn’t know we were going to get and we got this huge wind fall with like I think our net on that was like two hundred seventy thousand dollars or something. I mean, totally unexpected.
I love natural disasters. I don’t about you but I thought that was pretty great. Now Katrina, the big natural disaster — you know, I used to have this assistant named Katrina and she was about the same. She drove me nuts. I mean you know years ago, she was really just hard to work with. Anyway — so it’s funny that the hurricane was also called that. But some people in Katrina really profited and they profited through the concept of highest invest use because their property got obliterated and then some developer came along and thought, gee instead of having some stupid little beach cottage here, let’s just build a high rise condo complex. This land’s worth a fortune. You’ve cleared it for us and now the city is open to new kinds of development because there’s no choice okay, whereas before if you wanted to build something and get a permit it would have been difficult. But now that everything’s destroyed, you know, they’re rushing the permit process right through. See so, natural disasters really — that should go in the opportunity column in some ways.
But one area of natural disaster insurance –well, two areas really, a lot — that a lot of owners get burnt on, earthquakes and floods, a lot of people aren’t insured for those things so you know, that’s something potential weakness okay, in all seriousness. Opportunities, mortgage induced debt destruction, my phrase that I coined, which is how inflation pays off your mortgage for you. Don’t need to go into that because you know all about it because you listen to the podcast. Regression to replacement cost which we talked about, inflationary value and rent increases, so rent — does rent go up and down– up or down, it always goes up in the long run. You know it just never goes down. The rent is too damn high, as the — as the guy says, and the acquisition price, of course being below the cost of construction or below the cost of replacement.
Huge opportunities there and need I mention, Steve this was kind of — part of your thing, but thirty year fix rate debts are at historically low rates that you won’t pay off until 2042. So, there’s going to be a lot of changes in the world in the next three decades and you’re going to take advantage of those through this mortgage or replacement induced debt destruction.
Threats, well could rents collapse? Okay look, here’s where my whole investment philosophy just goes down the toilet. Are you ready for this? Reduction and population, I have no solution for that one. So, if you followed my philosophy and say I even have this philosophy, and say I even existed in 1960 and you were doing everything we’re talking about today on the podcast and you did it all in Detroit, when Detroit was one of the world’s flagship cities and then you saw the population of Detroit cut in half, you’d really be in trouble. Population reduction, all bets are off. That’s when rents could collapse.
Now population reduction doesn’t have to be the Rockefeller Plan and the Georgia Guidestones and world conspiracy type stuff, but it could just mean out — out migration of a certain city and this is why you diversify your area agnostic and you pay attention to growth trends and you invest in business friendly places, because capital always flees to the most friendly place. That’s just the rule of life, as long as it can and the only time it can’t is when you build a Berlin Wall around it. Obviously, that plan doesn’t work very well.
So rent collapse, price deflation, hard to have price deflation when you’re buying at one third or one half the cost of construction. Right, do you agree? And — and remember, all these construction material with all these sticks and bricks, they’re not indexed to the dollar. They’re not tied to the U.S. economy. They’re in demand globally. They’re traded globally. They’re a basic human need of seven billion people, always increasing in size around the world. So, population out migration is really the cause of the other two, and then new inventory suppressing rents.
So, here you’ve got the concept of the three dimensions of real estate that I talked about on the show many times, and we don’t have time to go into, but say for example a lot of you investors enter the market, they could put a lot of new property on the market in the rental market, right? However, then that probably has happened as a result of real estate being a very attractive investment. The price is going up. The speculators getting in, that’s usually the end of the bubble cycle. I don’t think this is going to happen any time soon, but it will happen at some point in the future. It certainly happened in the past. And here with that kind of scenario, you — you just play to the right angle — the right approach of the market at that time.
So, when you know that income property’s a multi-dimensional asset class, you have one of these things working for you. You either have a market where maybe rents are going down and being suppressed because all of the people are being sucked into the home buying market if affordability is really high like it is now, and at the same time you have to have ability to actually get loans, which that’s not easy now, and you have to have a — a cultural feeling that homeownership is a good deal, and everyone wants to be a home owner, which you don’t have now. So, this is actually good for us in terms of our rents, but it’s bad for us in terms of the opportunity to have prices increase a lot. So, either way you — you can benefit when you understand that income property’s a multi-dimensional asset class.
You either have decreasing rents, and you’ll probably have with that appreciating prices, so maybe that’s the time to sell, or if you have — nobody’s buying then prices are probably pretty flat but rents are going up. People only have three choices and that’s great for us. Buy, rent or be homeless, that’s it. So, understanding income property is a multi-dimensional asset class and that’s what really helps you in this swot analysis here.
So, I think you can probably see that the threats and weaknesses are actually all very manageable and they’re actually pretty low.
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Jason Hartman: Hey, it’s my pleasure to welcome Jim Rogers. You all know his name. He is a very renowned investor and author of financial commentator and just has an incredible track record. You’ve seen him on many, many media outlets, including time — the New York Times, Barron’s, Forbes, Fortune, the Wall Street Journal, Financial Times and he’s a regular guest on Bloomberg and CNBC. Jim, how are you?
Jim Rogers: I’m fine, Jason. I’m — I’m — once again, I’m in the — in the gym exercising on my bicycle.
Jason Hartman: Well, there’s Jim in the gym and I think you were doing that last time we talked. It’s good that you stay in shape. You’re doing the bicycle when you’re not doing one hundred thousand miles around the world on your motorcycle. It being —
Jim Rogers: Well yeah.
Jason Hartman: — being the investment biker.
Jim Rogers: I’ve got a couple of young daughters, so I have to — I have to stay fit.
Jason Hartman: Well good. You know, I first became familiar with your work when I read the book Adventure Capitalist and I absolutely loved it. You’ve written several books now and what is your latest, Street Smarts?
Jim Rogers: It’s called Street Smarts, Adventures on the Road and in the Markets.
Jason Hartman: Fantastic. And tell us about that one real quickly.
Jim Rogers: Well, it’s sort of a — I mean it’s almost a memoir. It’s a lot of the lessons that I have learned over the years, how I learned them, both — certainly both the — the failures and a few successes and hopefully — well so far, people keep writing me that it’s the best book I’ve written. I’m — I’m a little startled, but anyway it’s a — it’s a lot of experiences, a lot of stories. Hopefully, people will learn a lot from it, just as I have learned a lot from my life.
Jason Hartman: Fantastic. Jim, I wanted to ask you a couple of things about what’s going on in the world economy now days, and I saw you on a recent interview where you talked about some of the potential pitfalls and risks of gold. Gold has been so popular over the last decade, as people are looking at all this money printing. What are your thoughts on that?
Jim Rogers: Well, I own gold Jason, as I’ve said many times and I have for many years. Gold has been up twelve years in a row, which is very unusual for any asset that I know of, at any time in history. So, gold is correcting. It has been correcting for several months now, eighteen months or so or seventeen months or so, which is normal as far as I’m concerned. What’s not normal is lots of speculators pip and polly into gold and that’s usually a — a sign of caution and it’s just too many speculators at the moment.
The other thing that’s not normal is that in those twelve years, gold only had one correction of over thirty percent. Now as you know, most assets correct thirty or forty percent every year or two. It’s normal. But here gold’s been up twelve years in a row with no down year and only one correction — significant correction. So, it works. You know I mean I’m not selling my gold and if is should collapse for some reason, I’ll buy it. The Indians are talking about doing all sorts of things that you know, decrease the demand for gold in India. India’s the largest buyer of gold in the world. If that happens who knows how low the price could go, but if it does happen or if something like that happens Jason, I hope I’m smart enough to buy more or a lot more.
Jason Hartman: At the time of the big correction, in other words, right?
Jim Rogers: If — if it happens, yes, if it happens.
Jason Hartman: Fantastic. And I wanted to ask you your thoughts — there’s a lot of talk about the ridiculous instability of the government sponsored entities like Fannie Mae, and your thoughts — first of all, do you think there’s any possibility that we will see the end of Fannie Mae or Freddie Mac any time in the near future?
Jim Rogers: Oh my, wouldn’t that be wonderful?
Jason Hartman: Yeah, I — I think so too actually, but most people in real estate like myself think it would be a disaster, so I wanted to get your thoughts on it.
Jim Rogers: Well, Fannie Mae has been and is essentially bankrupt. As you know, the government — U.S. government is holding it up — propping it up, but even then the U.S. is now all of us, and now on the hook for staggering — staggering amounts of debt, off balance sheet debt at Fannie Mae. So, I — I mean as far as I’m concerned, I’m not in the real estate business, I’m just — so I — I don’t particularly want Fannie Mae to survive because I don’t like paying the taxes for their — for their mistakes, at all and I would suspect that eventually congress is going to have to — I mean there are people in congress right now who would like to get rid of Fannie Mae, as you know. I suspect that eventually they will have to just because it’s costing so much money. Now probably it will be phased out over time, but you know I — I — I don’t see how it can survive Jason, because it’s costing us so much money.
Jason Hartman: Yeah, it’s just something that they keep feeding, and it’s on the life support and just costing the tax payers a ton of money, not just really in taxes but ultimately in inflation, as they print money to keep these ridiculous programs alive.
Jim Rogers: Well not just that, they’re also creating a lot of money through bail out a lot of homeowners, and again that I guess if I were a homeowner I’d like to be bailed out, but unfortunately I don’t particularly like paying for other people’s mistakes.
Jason Hartman: I think ultimately what would happen is if — if we see Fannie Mae go away, we’d see a — a decline in real estate prices as financing dried up before the free market started to fill the vacuum, ultimately, but we’d see an increase in rents because if people can’t buy, they have to rent. So, I think that would put more pressure on rents. Your thoughts on that?
Jim Rogers: Well, yes and no. There’s a lot of excess housing in the U.S., as you know. There are a lot of homes — a lot of homes and apartments that have been confiscated in the past. You probably know better than I do, in the past three or four years. So there is plenty of supply right now.
Now your answer to that might be, and perhaps correctly would be, yes but some of those houses are in places where people aren’t, you know. [Voice over],
Jason Hartman: Like Detroit.
Jim Rogers: Right. Or — and then there’s not enough houses in North Dakota, but we’re just booming. So yes, you’re right about that to some extent and that is a problem. So, rents in North Dakota are going to boom and you can buy a house in Detroit for one hundred dollars, so yes and no, as — as you know better than I do because you’re in the business, it’s location, location, location.
Jason Hartman: Yeah, yeah and the — and the distribution of that housing stock is so important. I mean we’re seeing a lot of home builders really come back into the business with a lot of enthusiasm, which has actually shocked me how quickly that seems to have turned. Any thoughts on the home building side of the equation?
Jim Rogers: Uh, I don’t have a position either long or short. They seem to have gone up a whole — I know they’ve gone up a whole lot. To me, it looks like they’ve gotten ahead of themselves. I’m not as optimistic about how the economy is going to play out over the next two or three years, so I — if I had to do something, I would sell them but fortunately I don’t have to do anything, so I’m just watching.
Jason Hartman: And what — and you were saying home builder stocks when you mentioned — when you said you would sell them, right?
Jim Rogers: Yes, yes, yes, yes.
Jason Hartman: Yeah, okay. All right. And that’s really the next thing I wanted to ask you Jim, and that is we hear all of this news — I think it’s fake. I think the recovery is fake. I think it’s a nominal recovery, not a real recovery, but there’s — there’s all this talk now. It’s like the whole media climate seems to have changed about how we’re in recovery mode. Is there any bright spot on this or — in this or is it just a completely a bogus recovery?
Jim Rogers: Oh yeah, some parts of the American economy are booming. Agriculture, mining, energy, no, no, no.
Jason Hartman: Well, well, real things, commodity oriented things, real things —
Jim Rogers: Yes, yes.
Jason Hartman: — but — but not smoke and mirrors things, yeah.
Jim Rogers: Well, there’s not much going on in Detroit, apparently. In some parts of the American economy, but if you’re in Nebraska or North Dakota, Oklahoma, I mean you don’t care if Wall Street’s falling off the face of the earth, because you’re too busy. You’re making too much money and you’re going to work every day.
Jason Hartman: What I was really referring to in asking you that question is the completely insolvent nature of our government. The — the massive deficit, the massive debt and there seems to be no end in sight. It’s like one crisis to another, Jim. We run from debt sealing increase to physical cliff, back to debt sealing increase again. I mean, this is just — you — you couldn’t write fiction like this. It’s so ridiculous.
Jim Rogers: I — I know you couldn’t. You’re exactly right and that’s one of the problems. We’ve got a lot of clowns in Washington who don’t even know that they’re clowns, unfortunately. Jason, from that point of view, if that’s what you meant, yes. No of course, we’re all facing — we — when I say we, all of us who are Americans and — which is going to effect the whole world obviously, since America’s the largest economy in the world, are going to face staggering problems. I mean, we are the largest debtor nation in the history of the world, Jason, and the debts are going up by a trillion dollars a year. That a trillion with a T. I mean, the last five years our debts have gone up more than in the entire history of the Republic.
When — when we decided to set out to destroy ourselves, we’re pretty good at it. We do it quickly and viciously. So no, we — I don’t know when the next slow down’s going to come, but Jason we’ve had slow downs every four to six years since the beginning of the republic. We had one in 2002, 2007 and ’08 was worse because the debt was so much higher.
Well Jason, the next time we have one whether it’s later this year or 2014, 2015, it’s going to be much worse than 2008 because the debt is so, so, so much higher. Yes, there’s artificial prosperity right now. The government’s spending staggering amounts of money and the federal reserve is printing staggering amounts of money, but this is all extremely artificial, and we’re all going to suffer and pay the price. And many of us are already paying the price.
Jason Hartman: No question about that. I — I think — you know unemployment is much higher or really when counted with under employment is much higher than the government of course reports and I’m sure you’ll agree with that. But the question sort of becomes, how long can they just keep kicking the can down the road? I — I always try to ask myself Jim when investing, compared to what?
You know, America is — is — is pretty much a mess financially it would seem, but so many other countries seem to be in a similar situation. Are we just kind of like one of the best and better houses in a bad neighborhood?
Jim Rogers: No, no, no. We’re — we’re in the worst houses in a bad neighborhood. Yes, there are — there are countries that have trouble, but — but we’re much — we’re among the worst in the — in the world. I guess you’ll site Grease or somebody but our — our overall situation is — is — except for the fact that we’re you know the United States and can print money, our situation is as bad if not worse than Grease is and — and many European countries that have problems, yes. Italy’s got serious problems, but we’re worse.
Jason Hartman: Spain, Portugal —
Jim Rogers: All I’m suggesting is — yeah, yeah, yeah, name them all but we’re in worse shape than all of them. It doesn’t mean they’re not in bad shape, but remember those are small countries Jason. I mean, Portugal has ten million people. Spain only has forty million people. I mean, you know Spain is about the size of Califor — a little bit bigger than California. California’s only one of our states. So yeah, there are people with problems in the world.
Japan’s got staggering internal debts, but on the other hand they’re the second largest creditor nation in the world, when it comes to international reserves. So no, no I’m afraid — yeah, I’d like to say that we’re — we’re less bad than others, but no, we’re — we’re among the worst. And that’s why you and I and everybody listening to this program is going to suffer very dramatically during the next decade.
In — in Japan, they talk about the lost decade of the ’90s. Now they talk about two lost decades. We’re going to have at least one or two lost decades as well.
Jason Hartman: And will those lost decades be inflationary? The few — and there are very few of them — the few deflationists out there who are getting you know a lot of attention, they say that well, the money isn’t hitting the streets, there’s not enough velocity, that’s why we don’t see any major inflation. I think that the real inflation right now is about nine percent, but is — is that lost decade going to be a deflationary decade or an inflationary decade? What’s it going to look like?
Jim Rogers: Well throughout history, when people have printed money and the bank’s currency is high, it’s led to inflation. I mean I wish I could tell you it hasn’t. Certainly, we’ve had deflationary collapses, but they haven’t been when people were printing money when there’s excess debt and nobody printed enough money or debased enough currency. So, I would suspect that things are going to continue to get worse on the inflation front. All governments around the world are now printing huge amounts of money. The Japanese, the Europeans, the Americans, they’re all — this is the first time in recorded history that all major central banks — nearly all major central banks are printing a lot of money. So, I don’t see how that can not lead to more inflation. There may be some collapses in the meantime. I mean, you see what happened in 2008. Yes, it was a temporary collapse of everything, but immediately government started printing more money and prices went back up and prices still continue to rise despite what the U.S. government tells us.
So, I would suspect we will have more inflation and it will get worse and worse and worse. And eventually of course, we’ll have — it’ll collapse because all inflationary hypes pop eventually and then we’ll have a deflationary collapse.
Jason Hartman: Any predictions from Jim Rogers on what that inflation will look like? Does it mean twenty percent annually? Does it mean fifty percent and one hundred percent annually? I mean, you know when you look at history, those are still pretty small numbers, pretty small — pretty low rates of inflation compared to other countries, Argentina, [inaudible] all — all of the – certainly agree all of the examples. I mean what — what kind of numbers are you looking at maybe?
Jim Rogers: Well, I’m — I’m not smart enough to know. I think people should probably listen to your radio show to — to get the best answer, but I — I will say, I hope that it’s kind of numbers you were talking about is what happens. Twenty percent would be nothing. The twenty percent annual inflation would be nothing for countries that face the kind of situation we’re in. As I said, we’re the largest debtor nation in the history of the world. The debt’s skyrocketing and the central bank is printing money at a staggering rate.
If you look back in history, twenty percent inflation — eventual inflation, a country like that is — is nothing, it’s peanuts.
Jason Hartman: Right, it is, it’s nothing.
Jim Rogers: So, the — the indications are, and history would indicate, that we’re — it’s going to be much worse than that now, conceivably suddenly Washington will stop printing money and — and stop spending money, and then we’ll have the collapse now and we would have deflation now. But it’s also conceivable Jason, that the Easter bunny’s going to bail us out or the tooth fairy, you know. Lot’s of things are conceivable. Are they practical and real? Not very.
Jason Hartman: Yeah. Well very good. Thank you for the update Jim, and I so much appreciate you being with us. We caught you in the gym but appreciate you taking a few minutes with us and again, it’s always great to have you on the show. Take care and — oh, also give out your website if you would. I don’t know which one you want to – want to give out. Is it where your blog is or —
Jim Rogers: Well, I don’t — I don’t have a blog. People who have set up blogs in my name but I have nothing to do with them. Just — I think what people should do is — is read the book. It’s called Street Smarts Adventures on the Road, and in the markets that’s — I don’t have a blog so that’s the best source of information about me.
Jason Hartman: And — and how many books is that for you? How — how many books do you have out now?
Jim Rogers: That’s the sixth — that’s the sixth — I mean, there’s been books about me, but that’s the — the six that I’ve done.
Jason Hartman: Fantastic. Well, congratulations on the new book and thanks so much for joining us today.
Jim Rogers: Thank you Jason, my — my pleasure. Let’s do it again.
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Transcribed by Debra
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