Banks in transition – Jim Rogers and the decline of the West

This is a very interesting and delicious video with Jim Rogers. He is an incredibly straight talking Hedge Fund investor.

This video is part 2 of a three part series. When I was watching it, I was really listening to the BBC presenter, who does not seem to have any idea about chaos, complexity or transition. He appears to have very fixed views on just how resilient the US economy is, i.e. that the US is highly resilient and that Asian economies are just some unsustainable boom. He asks: “Isn’t America well placed to bounce back.”

Here are some quotes from the interview. He starts by saying “America is in serious sh – trouble”. He just manages to stop himself from a quite rude word there.

The United States is the largest debtor nation in the history of the world. No country who has ever gotten itself into that situation has ever been able to get itself out without a crisis or a lot of problems.

Go back and look at history. When a nation gets into this amount of debt, it always ends badly. And the debt is getting worse and worse. The head of the central bank in the United States knows nothing about currencies. If he doesn’t understand currencies, then no one else does either. The Dollar will lose its reserve status so, perhaps within the next 5 years.

Look at the numbers. There is no way, even in theory, that the United States can pay off its debt. It can inflate its way out of it, but that is just another method of default.

Read more:
http://jimrogersblog.com/bbc-slams-the-jim-rogers-hedge-fund/

There is also a very interesting article in The Telegraph on gold and a potential return to the gold standard:

Return of the Gold Standard as world order unravels
Ambrose Evans-Pritchard

As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.

“It is very scary: the flight to gold is accelerating at a faster and faster speed,” said Peter Hambro, chairman of Britain’s biggest pure gold listing Petropavlovsk.

“One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money.”

China, Russia, Brazil, India, the Mid-East petro-powers have diversified their $7 trillion reserves into euros over the last decade to limit dollar exposure. As Europe’s monetary union itself faces an existential crisis, there is no other safe-haven currency able to absorb the flows. The Swiss franc, Canada’s loonie, the Aussie, and Korea’s won are too small.

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to “consider employing gold as an international reference point.” The Swiss parliament is to hold hearings on a parallel “Gold Franc”. Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.
Mr Bernanke himself was grilled by Congress this week on the role of gold. Why do people by gold? “As protection against of what we call tail risks: really, really bad outcomes,” he replied.

Indeed.

While the scandal of phone hacking by the News of the World, and the potential demise of News International saturates our news, we sometimes lose track of other huge developments in the world. These can then seem to spring out of nowhere to surprise us. But if you are in a large organisation doing scenario planning for the future, you may want to do some straight talking as Jim Rogers clearly has done, and learn to call a spade a spade, as opposed to being in denial about dynamic change and just what a turning point we find ourselves in today.

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