Saturday, November 28, 2015   

Six more hard years tipped for subprime fallout

Benjamin Scent

Monday, November 19, 2007

The US subprime crisis will continue for years to come and America may be facing a permanent decline as an economic power, famed investment guru Jim Rogers said over the weekend.

"The situation is going to continue to deteriorate," he said in Hong Kong.

"When you have a bubble, it normally takes years to work out all the ramifications."

The subprime crisis is not over, Rogers said.

"I think we have a long way to go before it's finished," he said later at a conference. "When you have a bubble like this, it usually takes five to six years to clean it up."

Rogers said not many people have lost their houses yet despite a credit bubble that allowed Americans to buy a house with no down payment - a situation unprecedented in US history.


But he said many will lose their homes before the crisis is over.

"Inflation's going to get much worse. You are going to have more people losing money. You're going to have more bankruptcies," he said.

On top of his dire prognosis, Rogers said he does not see anything that could be done to save the day.

But, he said, any steps the US authorities take to try and stop a recession will not help the economy anyway.

"Let it happen," he said. "There are these bad elements in the economy that need to be cleaned out."

Rogers said that America's position as an economic power may be starting a permanent decline.

"The United States has certainly peaked," he said.

"America, in [my daughter's] lifetime, will certainly be a shadow of its former self." Rogers has one daughter, Happy, who is four.

China will be the "next great country in the world," following Britain's economic dominance in the 19th century and the United States after that.

He said of the ramifications of a devalued dollar: "You've got to figure out ways to protect yourselves. It's going to change, the world as we know it."

The dollar's decline is getting "very bad," he said.

He predicts many countries are going to stop using the US dollar.

In response to reports that Gulf countries, including the United Arab Emirates, are pondering dropping their currencies' pegs to the US dollar, he noted some countries had already done so and expects more to follow suit.

"In 20 years, very few [countries] will have their reserves in US dollars - very few," Rogers said. "You have to be nuts to buy US dollars in the twenty-first century."

Rogers also called on US Federal Reserve chairman Ben Bernanke to resign for devaluing the greenback.

"All he knows about is printing money, and he's doing it," Rogers said. "He doesn't know about the value of the dollar; he doesn't care about the value of the dollar."

The bow-tied investment sage, who helped launch the Quantum Fund with George Soros, said the yuan could replace the US dollar as the world's reserve currency in 15 years, after it becomes fully convertible.

"I don't suspect the euro's going to last 15 to 20 years from now," Rogers said.

"The yen will never be able to replace the dollar."

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