Jim Rogers and Marc Faber Predictions for 2012

LvMIC:

Often the only two Austrian-minded investors with a clue, both Rogers and Faber see the same things coming in 2012: more government spending, more debt accumulation, another economic downturn, and, of course, more money printing.

Examiner.com:

Australia Financial News Network:  Well you’re clearly an investor with eyes on global horizons, but what’t your outlook for global growth stepping into next year?

Jim Rogers:  Well, I’m not too optimistic about what’s going to happening in the world in the next two or three years, and maybe longer.  We have serious problems in the United States.  You know in 2002 we had an economic slowdown, 2008 was even worse because the debt was so much higher and the next time around the debt is going to be staggeringly higher.  So the problems are going to continue to get worse until someone solves the basic underlying problem of too much spending and too much debt.

AFNN:  Elaborating on that problem of too much spending and too much debt, what do you believe is the biggest risk to global growth in 2012?

JR:  In a nutshell, too much debt and of course, the biggest risk is the central bank in the US which keeps printing money.  We have big problems of money printing, debt, too much consumption… be careful.

Business Intelligence Middle East:

Speaking in an interview with Jeanne Yurman of Reuters on the sidelines of the IndexUniverse’s 4th Annual “Inside Commodities” conference held on December 8 at the New York Stock Exchange, Faber said: “There is no doubt that QE3 will come in one form or the other, and in Europe also”.

“They will monetize,” he stressed.

Because of impending additional quantitative easing, Faber, who predicted the stock market crash in 1987 and turned bearish shortly before the 2007-2009 bear market, is less bearish on equities now.

If the S&P drops 10%-15% here [the US] and in Europe, “they are going to print money,” he predicted.

“When the EU [and the eurozone] were formed, in the Maastricht treaty it was stated that no country should have a fiscal deficit of more than 3% and the debt to GDP ratio should not exceed 60%, but nobody kept that promise, Faber reminded his host.

The first one to violate [the rules] was Germany, he added.

When you look at what happened subsequently where countries had huge expansions in debt/GDP, you have to ask yourself what did these bureaucrats do all day? asked Faber.

The renowned investor clearly disagrees with Keynesian policies that seek to get out of the crisis caused by too much borrowing and spending by spending and borrowing even more.

The limit of these [Keynesian monetary] actions has been reached he said. You can increase debt but it doesn’t increase prosperity or economic growth, because there is a point where the excessive debt growth doesn’t stimulate economic activity any more, but it does create bubbles in different sectors of the economy.

And because we’re in a global economy, the intended consequences of the actions may not even happen in the US. “Mr. Bernanke’s monetary policy was designed to lift the housing market. The only asset that didn’t go up since 2008 is housing.”

Rogers is long commodities like always.   Faber speaks highly of gold which he says is cheaper today than ten years ago when compared to monetary base expansion and government debt.

While looking at the financial laughingstocks that are the Eurozone and U.S. government, it’s obvious how addicted politicians are to spending.  U.S. Congressman Ron Paul is running for president on a plan to cut $1 trillion from the federal budget in his first year in office alone.  The plan is considered radical by the media and virtually the rest of Washington D.C.  The irony is that such cuts only bring government spending back to 2006 levels; hardly radical by any means.  But like any addict, the political class will go to any means to meet their next fix of being reelected.  This means keeping the gravy train rolling with buying more votes.  To keep the borrowing frenzy going, the Federal Reserve will keep suppressing interest rates by priming the monetary pump.  Meanwhile, the European Central Bank is keeping the EZ afloat through backdoor monetary easing.  China, facing its own inflationary bust, recently relaxed banking reserve requirements for the first time in years as it struggles to both cool down rampant inflation and keep its own property bubble from rapidly bursting.  Rumor is, the former communist nation will cut reserve requirements again soon- yet another admission of the inability of central bankers to come up with a solution beyond the printing press.


The biggest economies in the world are stuck between a rock and a hard place.  The good times of the inflation-fueled boom have come to an end.  Since market corrections don’t bode well for winning reelection; they are avoided like the plague by prescribing the exact same remedy that brought on the sickness to begin with.  This is why Rogers, Faber, and anyone familiar with the Austrian school sees nothing but more money printing in the future.  2012 is going to be a bumpy ride.