Singapore: Britain and several euro zone countries are likely to have their credit ratings cut in coming months as debt problems worsen, and Western policymakers are bound to embark on more quantitive easing to get their economies moving, American investor Jim Rogers said on Monday.
He also said Standard & Poor’s acted too slowly in stripping the United States of its AAA rating on Friday, and that he remained bullish on commodities as investors turn to real assets amid fears of further quantitative easing by the US and European central banks.
“The idea that the US is downgraded and the UK is not is lunacy. There are many countries, Belgium, Spain, lots of countries in Europe, that should be downgraded just as the US has been downgraded,” Rogers said in an interview with Reuters Insider.
Rogers, who co-founded the Quantum Fund with George Soros in the 1970s, is a well-known investor and public speaker known for his bullish views on commodities and China. He now lives in Singapore.
Rogers said he has long positions on agriculture, gold and other commodities and is short on emerging market equities, government bonds and large US financial institutions.
Despite the recent falls in commodity prices and US Treasury yields, he said his positions remained healthy as the losses were offset by gains on his short positions.
Rogers predicted Western governments will embark on a new round of quantitative easing to help spur their moribund economies, as politicians and other policymakers were not prepared to go through the pains of bankruptcy.
“They’ll try to disguise it. They’ll call it cupcakes or who knows what. It’ll cause a big rally in raw materials and commodities because more and more people will realize they are printing money, they are debasing the currency.”
In contrast, Rogers said China was doing the right thing in trying to cool its economy and combat inflation.
“Is it going to be fun? No, some real estate investors are going to go broke in Shanghai and other parts of China. But that’s not the end of the world, that’s not the end of the Chinese economy. Things may slow down but China’s not going to fall off the face of the world.”
Rogers called on European politicians and bureaucrats to face reality and let weak eurozone governments default, and “the people who made the bad loans lose money.
“The idea of printing more money and buying up worthless bonds instead of forcing people to go bankrupt is ludicrous.”
“In America, we had states and cities go bankrupt, many times. It didn’t end the United States, it didn’t end the US dollar. It caused some pain, some terrible pain. But that’s how you solve problems.”
“You start over from a stronger base, after you acknowledge your mistakes... That’s what capitalism is all about.”