Speaking with Russia Today’s Lauren Lyster, Tuesday, investor and financial author Jim Rogers of Rogers Holdings said the world is awash with “serious, serious problems facing it” and that U.S. policymakers have only exacerbated the problems of sovereign debt.
In Washington, while the 2012 election cycle begins in earnest, politicians seek to appease angry constituents by jumping on the opportunity to scapegoat China as the source of a horrendous jobs outlook in the U.S.
“We’re already in a trade war,” U.S. Senator Charles E. Schumer (D) of New York told NY Times. “We can’t afford to just do nothing. This is a message to China that the jig is finally up.”
The latest bill that’s slated to clear the Senate this week, which calls for punishing China as a currency manipulator, would be a serious matter if not taken within the context of an election year, according to Rogers.
“It’s [Senate bill] a media charade,” he said. “. . . if you read the bill, you see that there’s an out. They leave it up to the Department of the Treasury to determine what to do.”
But Rogers turned serious at the thought of the possibilities of election year posturing escalating to bona fide sanctions on Chinese goods to the U.S. He said history shows that trade wars can easily lead to a slippery slope down to shooting wars.
“But Lauren,” Rogers continued “this could be terribly, terribly dangerous if we turn into a trade war.”
“If America does put on tariffs on the Chinese, the Chinese have various weapons at their disposal; they can stop buying American government bonds; they can sell American government bonds.”
“If they did that interest rates in America would go through the roof. The value of the U.S. dollar would go down a lot, perhaps a lot, at least a little.”
A trade war is not good for the U.S. and not good for China, he said, and could back leaders on both sides into a corner if the economics in the U.S. don’t improve.
“But what happens, Laura, whenever people get slapped in the face, they always think they have to slap back,” said Rogers.
On the dollar. “The standard reaction is in times of confusion is to run to the U.S. dollar. It’s the wrong thing to do in my view, but I know they’re all going to do it, so I’ve done it [before the run].”
“Many people, wrongly in my view, wrongly, believe the U.S. dollar as a safe haven. I own it. I don’t own it as a safe haven. I own it because I just assume everyone else is going to run there. It could go much higher for a while.”
But in the end, Rogers sees the U.S. in worse shape than Europe’s economic problems, though right now the focus remains on Europe.
“The U.S. as a whole is the largest debtor nation in history,” he said. “And we have a lot of independent states, Illinois, California, New York, to name a few, which are in very dire straits, like Greece, Portugal and Ireland. So all of us in the West have serious problems.”
Additional articles published by Beacon Equity Research can be found on their website at www.BeaconEquity.com