Wednesday, November 16, 2011

Global Collapse a Done Deal, says Jim Rogers - Beacon Equity Research

By Dominique de Kevelioc de Bailleul

As Rogers moved from India's Economic Times, to Fox Businessand over to his latest stop, CNBC, his message to investors is: If you think 2008 was bad, 2012 will be worse.

"We're certainly going to have more crises coming out of Europe and America; the world is in trouble,” Rogers told CNBC. He said everyone has spent beyond their means, public and private, “and it's all coming home to roost.”

Rogers' more dire message recently speaks to the consensus of other thoughtful and unencumbered minds of economics and finance this week, especially today, as Bloombergfeatured gold standard advocates Jim Grant and Jim Rickards during a lengthy joint discussion with the two men on Money Moves. Rogers doesn't refer to gold standards much as Grant and Rickards have lately, but he has discussed his fear of central bankers and their printing presses running wild in response to the crisis. Today, he believes the global financial system cannot weather a multiple of more debt added to the already highly leveraged central banks balance sheets prior to 2008.

“Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again,” Rogers said. “Greece cannot double its debt again. The next time around is going to be much worse.”

Jim Grant echoed Rogers, during today's Bloomberginterview, pointing out that by his calculations the NY Fed is “leveraged more than 100 to 1,” while in the next breath chiding the ECB for its profligate activities during the crisis, as well.

“Italian bond yields didn't drop on their own,” he said, referring to this morning's miraculous 170 basis points turnaround in the Italian 1-year bill rate moments following the auction.

In fact, piling on to the sudden slew of complaints about the ECB, JP Morgan's Michael Cembalest issued a note today, dispelling the rumor that the ECB has been so stingy, thus underscoring Rogers' point, that, though money has been printed in gigantic quantities, the problem has just gotten worse—not better—not more liquid—but increased insolvencies.

“To-date, that’s what [bank support] the ECB has done: of the 1.1 trillion Euros extended to European banks and governments (through sovereign/covered bond purchases and repo), 970 billion has been given by the ECB,” JP Morgan's Cembalest stated.

So with both the Fed and ECB piling more debt a top unserviceable mounds of previous debt, the critical mass or larger debt levels and higher interest rates set off the next crisis.

According to Martin Armstrong, founder of Princeton Economics, the breather between crises shorten until the final irredeemable breaking point is reached. Rogers believes that point is upon us, now, to as far out as 18 months. Those following Rogers know how conservative he is when discussing time horizons, which may suggest that an event may come closer to James Turk's expectation of mere weeks.

And he concluded on that point, "In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still - be careful.”

Jim Rogers

Warren Buffett

Nouriel Roubini