Jim Rogers on the Greek Bailout

Full Transcript – Jim Rogers on the Greek Bailout – November 4, 2011 below.

Reuters: Jim, first we had a referendum then we didn’t. Now there’s talk of a coalition government. How do you see this Greek drama playing out here?

Jim Rogers: Jon, all of this is just pushing for problems out into the future. Everybody is trying to get past the next election and it’s not going to end well at all. It’s going to end very, very badly for all of us. There are huge staggering numbers involved but not just Greece, all over Europe and these guys just don’t seem to get it.

Reuters: Well let’s talk about that because you know, you’ve got the UK saying now Greece is likely to stay but should they stay?

Jim Rogers: Should they stay in the EU? Of course, they should. And they should stay in the Euro as well. But what they should do is declare bankruptcy and everybody takes some losses, and there will be huge losses. You ring fence the bags and you know, make sure everybody’s checks clear. But just pushing this out into the future, you know, all of these plans, Jon, show everybody deeper in debt next year; deeper and deeper in debt in two years; deeper, deeper, deeper in debt in three years. This is not going to solve our problems.

Reuters: Okay. Well, Jim, let’s hear what Sarkozy had to say last night.

Sarkozy (soundbite): We have to react now and if yesterday’s meeting had any interest at all, it’s probably that they were a form of electric shock therapy, a positive one so that everything goes in the right direction.

Reuters: So electric shock therapy there. But you know, are the Greek people really ready to accept these austerity measures, do you think?

Jim Rogers: Jon, if they don’t, they go bankrupt. Who’s going to put up the money? Are you going to put up the money to bail them out anymore? Somebody’s got to have money in order to solve these problems. Let the– refuse to accept it. That’s fine. But then where would they go to get their money?

Reuters: Well, I mean that’s the point – the EU – that’s the point the EU leaders made, right? And that was the first time we saw the EU leaders really openly discussing the exit of a Euro member. So I mean to me, this makes me wonder – is this a step towards the end of a grand experiment?

Jim Rogers: Well they don’t have to leave. In America, we’ve had states go bankrupt, cities, counties. This has happened before. It didn’t end America, didn’t end the US Dollar. You let entities collapse, go bankrupt. This happens all the time. This happened throughout history. That’s all you have to do, let them go bankrupt, let the people who made the bad loans take their losses and start over from a sounder base. But just pushing into the future and letting debt go higher and higher will mean it’s going to end very, very badly and then you know, five years from now, you may have a complete collapse of the Euro, the EU and for that matter, all the Western world.

Reuters: You’ve said that yourself, if Greece goes, next will be Spain, Italy et cetera. So how can these guys – how can they actually let Greece go bankrupt in that situation?

Jim Rogers: Jon, how can they not? How can they not? Are you going to put- I’ll ask you again, are you going to put up the money because I’m not. Eventually, letting these debts go higher and higher and higher means the pain will be worse in three years, Jon, or five years or whenever the market says, that’s it, no more. Now at least if you do it, the government still have some credibility and some finances such as the Germans. You put everybody in the room, you say, okay, you’re going to go bankrupt. Your banks, Europe’s financial institutions has got to survive. Everybody’s checks will continue to clear. The system is going to stay up, stay stable and stay upright.

Reuters: So is there an orderly way to do that though-?

Jim Rogers: -in five years, there would not be anybody to pull into room and say, okay, we’re going to hold you together. Nobody will have any credibility anymore.

Reuters: Sure. But okay, so on that, is there an orderly way to do that? Can we actually see that happen and still have this all stay together?

Jim Rogers: Yes, we can do it. If we do it now, when Germany still has a lot of credibility; Finland, I mean for those tiny little countries but there’s still enough credibility of the governments and of the finances of the EU that you could pull it together. If the market forces you in five years, Jon, or three years, then nobody can hold it together, then massive bankrupts around the world, systemic collapse, the whole system is a mess.

Reuters: Okay. Well, Jim, now at the G20, we’re hearing plans for the IMF to boost its power, expand the use of SDRs, in effect almost turning into a type of reserve currency. So what’s your reaction to that? Do you think that’s the right direction for the IMF?

Jim Rogers: Many people in the G20, as you call them, they don’t have any money either. You expect the Americans to put up the money to solve these problems? Now many of the G20 countries have their own problems. Going forward, that’s not going to work. We can try SDRs, but what do SDRs solve? That doesn’t solve anything, and just creates more credit. That’s not going to solve the problem. We have a- Jon, we have a problem of too much consumption and too much debt. You cannot solve a problem of too much debt with more debt. Even if it’s artificial debt, even if it’s paid debt, it just makes the system worse and when the system finally collapses, then there’s nothing anybody can do. Nobody can hold it together at that point.