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Jim Rogers Shifts Assets Out of Dollar to Buy Yuan

by Open-Publishing - Wednesday 24 October 2007
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Trade-Exchange Rates International USA

Jim Rogers Shifts Assets Out of Dollar to Buy Yuan

By Marcel van de Hoef and Danielle Rossingh

Oct. 24 (Bloomberg) — Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999.I’m that pessimistic about what’s happening in the U.S.’’

Rogers, delivering a presentation late yesterday at an investors’ meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros. Reserve CurrencyThe U.S. dollar is and has been the world’s reserve currency, the world’s medium of exchange,’’ he said. That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.'' The Chinese currency, known as the renminbi, or yuan, isthe best currency to buy right now,’’ Rogers said. I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.'' The yuan strengthened past 7.5 to the dollar today for the first since the central bank ended a fixed exchange rate in July 2005. The currency has gained 10.5 percent since the dollar link was abandoned. China, growing faster than any other major economy, isgoing to be the most important country in the 21st century,’’ he said. China’s gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

Rogers also is buying Swiss francs and Japanese yen, which he said have been pounded down'' because of the so-called carry trades. Unwinding Carry Trades In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand. The carry trades in yen and francs willunwind someday,’’ which will send the currencies straight up,'' Rogers said.I’m buying the yen.’’

The bull markets in bonds and stocks are over,'' he said.Bonds will be a terrible place to be for many years and will in fact be going down for many years.’’

Rogers said he remains bullish on commodities because that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.'' Commodity Prices Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,’’ Rogers said. Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.'' He added,I think I’m going to make more money in agriculture than I make in precious metals.’’

Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,’’ he said.

To contact the reporters on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net ; Danielle Rossingh in London at drossingh@bloomberg.net .
Last Updated: October 24, 2007 00:48 EDT

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  • The Crisis in Unitary Thought: The Grave Inadequacies of Monetarism
    1. The problems listed above, along with the plethora of other bad news, some of which is even being delivered by the Wall Street Journal, is, of course, economic. But, contrary to the public perception, especially in America, it’s not exclusively the result of economics, or perhaps, mostly the result of economics. It is, in part, the result of the prevailing logic and like the weather can be seen everywhere you look, from fast food to shallow commentary on TV to scripted blather during the political debates.

    America has a long history of unitary - one dimensional - thinking, which only on rare occasions reaches deep inquiry. The current economic woes are a case in point. To address them, one customarily goes to the financial section of a newspaper or website. Unfortunately there’s not a Bad Logic section there instead, for much of what ails America’s economic conditions is the result short sighted understanding, ranging from politics to entertainment. In fact, we’re drowning in Bad Logic, but the finger often gets pointed in other directions - Liberals, higher taxes, political stalemate, lack of leadership. If you look hard and deep enough, underlying all those problems you’re going to find a reservoir of Bad Logic.

    For example, in the 80s, when the Neocons and conservatives were united in an effort to overturn the Democrats and rule for the next 100 years (1,000 years?) the complexities of America’s status were dumbed-down basically into: distributive, Keynesian-Democrat policies of high taxes and high welfare costs vs. Laffer’s low taxes, Friedman’s Monetarism, and Republican Hands-off government. What a hoax that’s turned out to be. Hands-off? Under the new "leadership" America was turned into a meddling, immoral imperial power with the modern form of welfare primarily going to corporate entities and the Military Industrial Complex.
    According to the unitary presumption that the U.S. economy was going to grow consistently at 3.4%, if not higher, there was room for optimism. Get the liberals out of the way, and, the logic went, there’s no telling how well Americans will do. Reagan and his crew preached, "Release the energy" and there will be salvation. Twenty years later and one doesn’t have to look very far to see the end of the empire. Remember Britain? It used to own much of the world and thought it always would. Oh well. Profound lessons come hard to the hard of thinking.

    Most of the hope for continued economic success was pinned to Milton Free-to-Choose Friedman’s notion that once distributive Keynesian policies were retired or minimized, then the only major concern was controlling the money supply. There were dissenting voices, such as Jack Kemp, who insisted that the money should be tied to gold so that it couldn’t be manipulated beyond control. But the dominant voices of their time insisted that the Monetarist model would be sufficient to control those potential problems. And so, like many problems in America that are treated superficially (one "liberal" arguing against one "conservative" on TV), it was ruled, summarily and quickly, the Fed was to arbitrate and keep everything peachy.

    Then the unexpected: the U.S. was transformed by MBAs dying to raise the stock prices of the firms they worked for in order to reap the kind of benefits that result in million dollar bonuses, a house in the Hamptons, and, why not, a Hummer - a vehicle suited for war. So, firms trimmed their staff, outsourced, contracted foreign labor both in the U.S. and overseas, retired manufacturing divisions because they were too slow for generating immediate profits. And before anyone knew it, the lemmings were headed to the cliff.

    Wal-Marts displaced Bob’s hardware store and Bob became an alcoholic. The small business, which Reagan and clan extolled as being the heart and soul of America, were under siege by the Mallization of America (Gap, Starbucks, Staples). Cheap stuff, most of it made cheaply, for less. And stock buyers and consumers, namely the unwashed and washed masses, ate it up. But there were bound to be problems ahead, particularly regarding credit, trade deficits, decent employment, pension funds, and, well, the future of a once great country. But so what. There was plenty of money to be made in the short term.

    Flip a house, buy Bechtel, put a little in foreign investment and let the rest of America - stupid idiots that they are - rot where they sit. If they’re insane, let them walk the streets. If they no longer have a career and are forced to work for 8/hr., tough. They should’ve gone to Dartmouth or another fine school.

    Soon that Ayn Rand - Me First - sort of ideology began to replace that Hallmark sort of vibe of Reagan’s Morning in America. That one for all kind of thing quickly deteriorated into gated communities, widespread dependence on guns for protection, locked doors, and the erosion of the more humane America once ruled by - dare we say it - the liberals.

    And in the meantime, with all those circumstances afflicting the economy, the Fed got lost as a result of expecting to apply the unitary theory of Monetarism (which is now out of favor to the point where few acknowledge using it) to solve all problems. In the 90s, after the bubble burst and Ponzi schemes fell right and left, the Fed was forced to lower interest rates to, effectively, 0.
    Eventually, however, the Fed had to raise them, and raise them, until, aiming to protect the currency versus international currencies, especially the EU, it reached an untenable number.
    In an effort to protect the assets of the rich, as well as the sanctity of a gravely weak dollar, they stayed the course, too long.

    And now the explosions are going off right and left. It’s obvious: There’s no easy solution, no unitary force field method to cure it all. Actually, it would be an excellent time for a mostly unreflective nation to look at itself, its values and its fate to see how to come up with a wise overall plan for healing America.

    If you’re a betting person, you’d be better off looking at another scheme. There’s no indication such a grand meaningful measure will be taken