With COMEX gold inventories declining, are we likely to see a run on paper gold? What would the implications of this be for the global economy and the futures markets?
ROGERS: No, I know that theory. If somebody wanted delivery of paper gold, the exchanges have enough mechanisms in place that they can get the paper gold. It does not mean that it couldn’t happen. Anything can happen, especially in financial markets. But I do not subscribe to that theory. By the way, I own gold, and I have not sold any gold, and I do not subscribe to the conspiracies about gold.
How do you see a rise in global commodity prices impacting global currency markets?
ROGERS: Well if you are at the right place at the right time you are going to make a lot of money. If you are in a country that has a lot of commodities and commodities are going up, chances are your balance of trade is going to improve, your overall economic situation is going to improve and your currency will probably improve too. Remember though that it can go both ways, when the price of cotton is going down, then a lot of people say "Pakistan produces a lot of cotton, let’s sell the currency", so it certainly goes both ways if you are a commodity country.
What are the underlying factors that make you bullish on agriculture?
ROGERS: The world has consumed more than it has produced for the last 10 years, so agriculture inventories are near historic lows now. But the problem is much worse than that around the world. We are running out of farmers. Farming has been a horrible business for the last 30 years. Therefore, few people have gone into farming. The average age of farmers in America is 58, in Korea it is 65, in Japan it is 66, in Australia it is 58, and in Canada it is the oldest in recorded history. The young people in America, more of them study public relations than agriculture. So the old guys are dying and no one is coming in to replace them. So unless the price of agricultural goods goes up a lot, we are not going to have any farmers at any price. Something has to attract people into the agricultural business and the only thing that will is higher profitability and that means higher prices whether we like it or not. I cannot tell you how optimistic I am about agriculture going forward. The world is going to have a crisis sometime in the next few years because we do not have enough farmers.
There are subsidies, yes, which is outrageous. The EU, my goodness, French farmers have all sorts of handouts. In America, there are subsidies, which makes it difficult for people in, say Africa, to compete. How can African farmers compete with Americans who are getting all of these handouts? So this is a terrible distortion of the world industry, which means that you have these shortages of farmers developing. Many African farmers have left the farms to go into the cities to do other things because they cannot make any money.
In India, there is a huge rate of suicide because farmers cannot make any money. The highest rate of suicide in the UK is in agriculture. So there are huge distortions, which means we are running out of farmers and there are problems. How do you change the image? I do not know, but when all the farmers are driving Lamborghinis, the image will change. All the young people will say, “Look at all of those Lamborghinis, the farmers are driving those Lamborghinis. See all those stock brokers driving taxis, I don’t want to be a stock broker, I want to be a farmer because that is where the Lamborghinis are.” Then the image will start to change. Some journalists will become agricultural journalists to go and cover the farm industry, then the image will change.
Does being bullish on agriculture make you bullish on the world’s breadbaskets?
ROGERS: If I’m right and agriculture is a great business for the next 20 years, the people who have agriculture are going to be much better off. Not only are the farmers going to be driving Lamborghinis, those economies are going to boom. The hotels, the restaurateurs, the shops, everybody is going to be better off in those countries and needless to say the overall economies, currencies, and stock markets will do better. If there is a shortage of food, and you have food, you are in good shape.
Unless the price of agricultural goods goes up a lot, we are not going to have any farmers at any price. Something has to attract people into the agricultural business and the only thing that will is higher profitability and that means higher prices whether we like it or not. I cannot tell you how optimistic I am about agriculture going forward.
Where are disconnects between asset values and economic realities most profound?
ROGERS: Mainly in places like the US and the places that are printing all of this money. There is a huge artificial situation going on where all the major central banks are printing money. This has never happened in world history when everybody at the same time are trying to debase their currencies. We have had individuals doing it, but we have never had the whole world doing it. So that is a major disconnect. The whole world is in an artificial situation right now. New York Stock Exchange stocks made new highs recently, German stocks made new highs, Japanese stocks went up by a dramatic amount recently. But this is all based on an unreality, it is based on printing presses and that cannot work. This is going to end and when it ends it is going to end very badly indeed. So be very careful and be very worried.
Are all Western economies doomed to a gloomy fate for the time being?
ROGERS: Well, all Western economies is a pretty big generalization. Canada is certainly in better shape than the US. The US is the largest debtor nation in the history of the world. Canada has lots of natural resources and it has not run up staggering debts. So some Western economies that have natural resources and that haven’t run up huge debts are certainly in better shape than others. But unfortunately, when the US and Europe, which is the largest economic entity in the world, run into trouble everybody is going to suffer. I mean you can’t have America and Europe suffering and the rest of the world saying, “Oh well, too bad for them.” No, everybody suffers at a time like that.
Any additional words of wisdom for investors?
ROGERS: Be very careful because these are perilous times. A lot of people are going to lose a lot of money in the next few years, so be very careful. Do not invest in anything unless you yourself know a lot about it. Do not listen to some guy you see on TV or in the newspaper or whatever. These are going to be difficult times, just be careful.