Monday, March 21, 2016

Its going to get bad - World economies will get worse

Q: How do you assess the state of the global economy?

Rogers: I am not optimistic about the global economy for the next couple of years. Japan is already in recession, some parts of Europe are suffering, some parts of America are suffering and that's going to get worse, in my view, because there is nothing to make the world get better.

In America, we've had seven years since our last recession. That is unusual because in America, normally every four to seven years, throughout history, we have had an economic slowdown. So it's overdue. It doesn't have to end in seven years, but we have many excesses which have taken place in the world economy, caused by very low interest rates. And the American central bank is making many, many mistakes by having interest rates so low and by printing so much money. And then the Japanese central bank and the European Central Bank, and the British central bank, all did the same thing. So we've had an artificial situation based on printed money and huge amounts of debt. [The Federal Reserve's] balance sheet was $800 billion in 2008. Now it is nearly $5 trillion. I expect the American economy to be in recession sometime in the next year or two.

Q: If printing money is not the answer, what kind of economic policies would you like to see?

Rogers: In the early [2000's], America had this kind of problem. America raised interest rates, America balanced the budget and had a horrible two years. But then America had the best economic decade in our history.

The world is going to have to face the problems and take the pain, and it's going to be painful especially in Japan. But you let people go bankrupt, you clean up the system and you start over.

So, the only solution I see is to admit our mistakes and now face those problems. Politicians don't want to do it, central banks don't want to do it. They say just keep printing money, keep borrowing money, keep building up higher and higher debt and everything will be OK.