The Month in Gold and Silver: Welcome to The Scoop

Announcer: Welcome to Sprott Money. It's "The Scoop" with Kam Hesari.

Kam: Welcome to the series premiere of Sprott Money's "The Scoop." I'm Kam Hesari, and this month's guest is a legendary investor, Jim Rogers, who's currently the chairman of Beeland Interests. Thanks for joining me today, Jim.

Jim: Kam, I'm delighted to be here.

Kam: We received a lot of questions for you, Jim. Thanks to all our listeners for sending their questions. I'll try to get through as many of them as I can. But before I start, if you enjoy today's podcast, please like, share, and subscribe to the channel you're listening to. Jim, in 2017, while Janet Yellen was the Federal Reserve's chair, she stated that she did not believe there'd be another financial crisis in her lifetime. She also stated that quantitative tightening in terms of balance sheet normalization would be like watching paint dry. History proved she was completely wrong on both those calls. Lately, Janet Yellen's been talking about the surge in inflation being transitory and how higher interest rates would actually be a plus for society and the Fed.

The current Fed chair, Jerome Powell, also believes inflation's transitory and says he's using unemployment numbers as his main guide on when to increase interest rates. Interestingly, a recent U.S. economic survey found that 67% of the public think inflation is a bigger problem than unemployment. Two questions for you, Jim. Is inflation transitory, and given all the sovereign debt, corporate debt, and consumer debt, can the Fed normalize interest rates without crashing the economy?

Jim: Well, Kam, Mrs. Yellen, Dr. Yellen has degrees from Ivy League universities, so who am I to say that she's wrong? I guess the only thing I can say is I have been reading more than she has, and I know I have more experience in the markets. I know she's dead wrong. I know we're gonna have many more problems in the financial world. We always have, and we always will. No matter whether it's Ivy League degrees or not, they're all dead wrong. They're all just trying to keep their jobs.

Kam: Jim, the fact that we have junk bonds with negative real yields is absolutely crazy to me. Do you believe the Fed's actions have created a bubble in bonds?

Jim: Kam, as I look around the world, the most obvious bubble is in the bond market. Bonds have never been this expensive in the history of the world. Interest rates have never been this low in world history. I mean, there's several bubbles, but that is the clearest bubble of all. And as I say, bonds have never, never been this expensive in the history of the world. So that's a very serious [inaudible 00:02:48.042]. Whether it's junk bonds, government bonds, any kind of bonds, they're all in a bubble.

Kam: Jim, has the U.S. economy been broken since 2008? And if so, how long do you think the Fed can keep propping up the markets?

Jim: Well, I would say the U.S. economy has been broken probably longer than that. You know, we've had Greenspan and a few other central bankers who thought that the simplest solution to life was to print money and drive down interest rates and get markets up. This has been going on for a while in the U.S. and the U.S. has become a gigantic debtor nation, partly as a result of this approach led by the Central Bank, but not just the Central Bank, Janet Yellen's the secretary of the Treasury, led by a lot of people in Washington. For them, the easiest solution is to spend money, borrow money, print money, whatever, and that's how they keep their jobs, and that's how they get elected. I know history is very clear, it ends badly, and it's going to end very, very badly, Kam.

Kam: Does that mean the U.S. will lose its world reserve currency status?

Jim: Well, history is very clear that no world's reserve currency needed the exchanges lasted more than 150 years or so. U.S. dollar has been on top for several decades now. So not this year, it's not going to come to an end, I doubt, but you can see that there are pressures already. There are political pressures in many countries. You know, if you have the world medium of exchange, it's supposed to be neutral, but unfortunately, if Washington gets angry at you, they put sanctions on you and say you cannot use the U.S. dollar. Well, many people would say, wait, wait, wait, that's not the way it's supposed to work. You're supposed to be completely neutral. So some countries are now looking for a competitor with U.S. for political reasons, a competitor. You know, Russia, India, Iran, Brazil, a few countries like that are looking for something to use, which could be more neutral and will not be subject to sanctions or somebody getting angry at you somewhere.

But also for economic reasons, I mean, the U.S. is the largest debtor nation in world history. So for economic reasons, people are starting to look for something which will compete with the U.S. dollar. So yes, the answer to your question is yes, it's going to come to an end. It's not going to come to an end this fall or just summer, but people are already looking for the economic and the political reasons I mentioned. So it's going to happen. I mean, I don't particularly like saying it, I'm a U.S. citizen, but I can see what's happening and I have to adjust to reality, not what I would like.

Kam: Jim, we've seen a huge market meltdown in Chinese stocks, and many investors requested I ask you if you believe this is just the beginning of the regulatory crackdowns, or is the worst over?

Jim: I'm not Chinese and I don't speak Chinese. So, I'm not sure I'm the right person to ask. I will tell you that what they set out to do, at least as far as education is concerned, is something that I agree with. I mean, who cares? They don't care. Nobody cares, but I thought they were doing a smart thing, and it is led to...I mean, they've...at least several of the companies they went after, as far as I was concerned, they were doing the right things. For instance, when they went after Alibaba, when they went after Ant, you know, you cannot believe that the huge boom there's been in private lending in China in the last 10, 15 years, it's just completely out of control and it's going to be a big problem. So, I fully endorsed when they set out to do something about the rampant peer-to-peer lending. We didn't call it peer-to-peer, I'd call it person-to-person. And likewise with the education, what they're doing, I happen to agree with them.

You know, I live in Asia and I can afford tutors, and I do, but it's not fair. I'd much rather pay higher taxes and have longer school hours or better teaching or something like that, but that's not the Asian way. So some of the things that China has been doing, I happen to agree with philosophically, but I want to repeat, nobody cares whether I agree with them or not, and certainly not the Chinese. There may well be more coming because there have been excesses in the Chinese economy. Is it the beginning of the bear market? Well, conceivably, that's how these things start. You know, they start in a place where most people are not paying too much attention. And then it works slowly, slowly, slowly, over a few weeks or a few months, it gets to the evening news. By the time it's on the evening news, everybody says, oh my gosh, Lehman Brothers is bankrupt, and they notice a problem. So this may be one of the steps along the way, but in my view, it's not the end of the bull market and shares in China or the rest of the world. But it's probably another step indicating don't worry, guys, this is going to come to an end someday.

Kam: Given all the U.S. and China tit-for-tat tariffs and the U.S Holding Foreign Companies Accountable Act, is it fair to say that the U.S. and China are in an economic war right now?

Jim: Well, there's certainly a trade war going on. As I sit and watch this, it's totally insane. First of all, history is very clear that nobody wins trade wars. Nobody ever has won a trade war. One of the main lessons of history, unfortunately, is that people don't learn the lessons of history. You can sit and say, God, this is what history shows is going to happen. Most of them will say, if they listen to you, say, "I don't care. I'm smarter than the history." You know, Donald Trump certainly thought he was smarter than history, and thought that nothing really mattered except his way. Well, I know [inaudible 00:09:09.617] wins trade wars, everybody loses trade wars, including a lot of people who are not even in the trade war. You know, let's just use Canada as example since you're there. You know, if the U.S. and China go into a trade war, Canada's going to be affected, even if you do nothing wrong, even if you just sit there and watch. And that's what happens in trade wars. And unfortunately, nobody wins.

Now, the second thing that history shows is it's always very easy to blame the foreigners when you have problems. The foreigners have different skin, different language, different religion, different clothes, different everything. So it's very easy to blame the evil foreigners when things started going wrong. It's happened millions of times and it's happening again. You know, the Americans would blame the Canadians. At one point, Donald Trump was blaming you even for all of our problems, but that's the way politicians work. They always have because it's the easy way, and they love the easy way. So this will probably continue. And when things start getting bad in their economy, in the U.S. or China or anywhere, politicians are gonna, once again, blame the foreigners, and that would only make things worse, not better.

Kam: It appears the numbers agree with you, Jim, as the U.S. trade deficit came in wider than expected at negative $75.7 billion. If the world continues on this path, do you believe China will lead the 21st century?

Jim: Well, you know, America became the most successful country in the 20th century, but along the way, we had plenty of problems. We had many depressions, we had civil war, we had illegal politicians, etc., etc. China is certainly going to have problems, but as I look around the world, I don't see any other country that is going to be the most important country in the 21st century. I mean, U.S. is now the largest debtor nationin world history. It is unlikely that a country in that situation is going to step forward and be a dynamic leader for the next hundred years. So the only country I see on the horizon that can do it is China, but China's certainly gonna have plenty of problems just as the U.S. did as we rose to lead the 20th century.

Kam: Jim, one thing that the West and China do agree on is that ESG is the future. Currently, China manufacturers the vast majority of the world's electric vehicle batteries and solar panels. And the European Union is aiming to become carbon neutral by 2050 while Joe Biden recently signed an executive order setting out a target of 50% of all passenger vehicles sold by 2030 to be electric. Also, the Biden administration previously stated its goal of 80% of all power generated in the U.S. to come from renewable energy by 2030. Currently, the U.S. generates only 20% of its power from renewable sources, such as wind and solar. Given the $3.5 trillion budget plan would include tax incentives for clean energy and vehicles, is silver positioned to benefit from the green energy push and the debasement of the U.S. dollar, essentially a double whammy?

Jim: Well, solar certainly has a lot of uses in solar power and many other things, as well as electric cars. If we have electric cars and it looks like we will, for example, I mean, an electric car uses several times as much copper as does a regular car. So all this move to whatever you want to call it, ESG, clean energy, etc., is going to have other knock-on effects rather than just, oh, you mean we're not gonna use gasoline anymore, and many, many other effects. And one of them will be much more demand for silver. Silver has many uses in electronics and in electric cars, as you know, and of course, silver helps prevent disease. I mean, so there's a lot of great uses, so don't sell your silver. At least I'm not selling mine.

Kam: Time for my favorite question. What's the most lucrative sector right now, and which sector would you not touch with a 10-foot pole?

Jim: Well, I'm going to give you...Kam, I'm going to give you a little more than you ask for. We talked about that bonds are certainly in a bubble worldwide, so you certainly should stay away from bonds all over the world. Property in many places is becoming a bubble. If you go to Korea, New Zealand, or a lot of places, you see bubbles developing. Stocks, well, we know that some stock markets are developing bubbles. I mean, not everything, but, you know, things like Samsung go up every day. There are many things that never go down, including in the U.S. But there's still stock in most markets that are not booming yet. So I don't see the stock market, big bubble, complete total bubble yet, but it is coming.

And as I look around the world, the only asset class that is cheap are commodities. I mean, silver is down over 50% from its all-time high. Sugar is down 70% from its all-time high. Oil is down 50% from its all-time high. These are not bubble numbers, Kam. I mean, when you talk about things being down, huge, huge numbers, that's not a bubble, and commodities are the only thing I know that are cheap.

Kam: Fair enough, Jim. Many Americans are nervous about what will happen in the fall with the debt ceiling debate, more stimulus packages, more COVID mandates, and possibly a surge in COVID which may lead to another lockdown. What do you see the rest of the year looking like?

Jim: Well, you need watch Sprott, they know. They can answer these. Call up Eric. He'll give you the answer to what's the rest of the year. The rest of year is what, three months, four months we have left in the year? I suspect we will have...correction, that we're having, will continue a little, and some markets will continue, but then the central banks will get worried and they will pump again. The market will rally, but next year I would worry. The next year, it's all coming to an end.

But I have to tell you, Kam, I'm very bad at market timing. I have no idea when this is coming to an end. I do know we're getting closer to the end because I can see the various signs that are taking place. We talked about what's happening in the Chinese market before. I can see these signs, you know, we have SPAC action making a comeback. They always come around when a bull market's been lasting a long time. New players come into market and they all tell their friends, "This is so easy and so much fun, and you can make so much money." Well, that's happening again.

You know, this is not my first rodeo, Kam. I've seen all this before, and I know how it's going to end. I don't know when. If I had to guess, and this is only purely a guess, it would be sometime next year, but I have no idea. If all the central banks really, really panicked and they all print, print, print, they can extend it for a while, not forever because it's been going on long time already, but this is not the beginning. This is not 2009, this is 2021 going into 2022.

Kam: Okay. Jim, let's look at some of the submitted questions. What would the U.S. 10-year treasury yield be today if the free market consisting of millions of decision-makers set rates rather than the Fed?

Jim: Oh my gosh. If I told you, you would hang up the phone and say, "I'm not going to talk to that nut anymore." Well, you know, the interest rates in 1981 in the U.S. were about 20%. That's not a typo, 20%, 2-0 percent. So we would certainly have much higher interest rates now than if we didn't have all this money printing and all this quantitative easing and all this buying of assets that they've been doing. I have no idea, but certainly it would be well over where it is now. And it's going back to very, very high levels again. You know, the bull market in bonds has lasted 40 years now. And that will come to an end, partly because the gigantic amount of supply of debt, huge amounts of debt supply, plus all the money printing and inflation's coming back. All of these things, it's not my first rodeo, it always leads to higher interest rates and higher bond interest rates, lower bond prices. And it will happen again.

Kam: Jim, how would you recommend playing the future sugar bull market?

Jim: Well, the best way, if you know what you're doing is to buy sugar futures. You can get rich in a week, in a day, if you get futures right, you can go broke in a day too if you get it wrong, but you know, sugar will have a resurgence as energy again, and sugar is down 70% from its all-time high. There's not much in the world that's down 70% from its all-time high. So I would learn about sugar futures. There are so many sugar companies. There's sugar plantations listed in some countries, Indonesia and parts of Asia. There're sugar companies that are listed, South America. So learn about the sugar stocks if you want to, learn about sugar futures if you want to. Next time you're at the restaurant, you know, and they put coffee on the table, put those packets of sugar in your pocket and take them home.

Kam: The next question's regarding Bitcoin. Jim, do you believe Bitcoin is a long-term store of value?

Jim: Do I? No, I don't. Well, let me clarify that. There's no question at all, money is going to be computer money eventually. You go to China and you cannot take a taxi with money, you have to use computer, you cannot buy an ice cream in China with money. Money is already basically on the computer, and nearly every country in the world is working towards that same status and governments love it. It's much cheaper for them. They don't have to print it, or guard it, or transport it or anything else. And once we have computer money, the governments will know everything you do, Kam. They will call you up one day and say, you've been having too much coffee this month, slow down. They'll know everything you do, which they love, of course, which I don't like, of course, but it's coming and it will be computer money.

But in my view, I'll just use the U.S., when the U.S. government has...all our money is on the computer, I don't think U.S. is going to say, okay, now this is money. This is the U.S. dollar. But if you want to use something else on your computer, you can. Governments don't think that way. They don't like to lose their monopoly. They don't like to lose their control. So I doubt...as long as these things are just trading vehicles and they don't hurt anybody, they don't threaten anybody, I don't see a problem. Problem is gonna be that if they're successful, and as you know, the bulls, the support [inaudible 00:21:21.931] gonna replace money, when you start telling governments that you're gonna replace their money, I don't think many of them are gonna say, "Oh, what a good idea, we'll give you permission."

Kam: Jim, we only have time for one more viewer question. What kind of triggers will make you add to your stack of gold and silver? And how far do you think prices can draw?

Jim: Well, the price, price and the mood of the market. I mean, if you start seeing on the internet, oh my God, I'm never gonna buy silver again as long as I live, you know, those are the kinds of things that catch my attention. So price and the mood of the market, despair would make me buy more gold and silver. How low? I have no idea. I mean, at the moment, I would certainly buy more silver than gold. Silver comparatively, and gold is down, what, 10% from its all-time high? Silver is down over 50%. So silver is cheaper than gold at the moment. So if I were buying either today, it would be silver, but let's see what happens as we go along.

Kam: Jim, thanks for sharing your wisdom with us today. Please let our viewers know where they can find your work.

Jim: Oh, I have a website, but that mainly just gives my public schedule. And my public schedule, there's not much happening these days because you can't go anywhere. And even if you could go somewhere, there are no planes, there are no flights. So jimrogers.com is a website, but it's not really...I'm not trying to sell it. I don't have anything to sell.

Kam: On a final note, the correction in gold and silver prices give someone an opportunity to buy the dip and possibly reduce one's average costs. You can purchase bullion online at sprottmoney.com or to discuss all your bullion options in depth, please call us at 1-888-861-0775. Also, we now have extended hours to meet the growing bullion demand. Well, that's it for this edition of Sprott Money's "The Scoop." I hope you found it a value, please like, share, and subscribe, and see you on September 10th for the next edition.