Federal Reserve Chairman Ben S. Bernanke’s decision to pump a further $600 billion into the economy shows his grasp of economics is weak, said investor Jim Rogers, chairman of Rogers Holdings.
“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers, 68, said in a lecture at Oxford University’s Balliol College yesterday. “All he understands is printing money.”
“His whole intellectual career has been based on the study of printing money,” said Rogers, who predicted the start of the global commodities rally in 1999. “Give the guy a printing press, he’s going to run it as fast as he can.”
The Fed said on Nov. 3 it will buy an additional $600 billion of Treasuries through June, in a bid to reduce unemployment and avert deflation. While Bernanke’s near-zero rates and $1.7 trillion in asset purchases helped end the recession, the Fed said progress has been “disappointingly slow” in bringing down joblessness that is close to a 26-year high.
“Debasing your currency has never worked,” Rogers said.
David W. Skidmore, a spokesman for the central bank in Washington, didn’t respond to a message seeking comment.
Bernanke, 56, a former Princeton University economics professor who was appointed as Fed chairman by President George Bush in 2005, is a long-term scholar of the Great Depression. He has argued that the central bank’s blunders helped worsen the financial crisis that began in 1929.
He has responded with the most-aggressive expansion of the Fed’s power in its history, cutting interest rates, making Federal Reserve loans available to investment firms for the first time since the 1930s and lowering the rates at which banks can borrow from the Fed.
Rogers said the Fed was “throwing petrol on the fire” of surging commodity prices, which rose to a two-year high today. He urged students to scrap career plans for Wall Street or the City, London’s financial district, and to study agriculture and mining instead.
“The power is shifting again from the financial centers to the producers of real goods,” he said. “The place to be is in commodities, raw materials, natural resources.”
Harvard Business School
“Don’t go to Harvard Business School,” he said. “If you want to make fortunes and come back and donate large sums of money to Balliol you’re not going to do it if you get an MBA.”
Rogers said his own index fund has performed “much better than all other commodity funds,” as well as all stocks and bonds, since he started it. He didn’t elaborate further. He wasn’t asked about the performance of his own investments in commodities.
“I’m here to sell books,” Rogers said, prompting laughter from the audience. “My little girls need royalties,” he added, referring to his two daughters, who are both younger than eight and were in the audience.
Rogers, who described the U.S. as the most indebted country in history, said quantitative easing had been a “horrible disaster.”
“It didn’t work the first time, it’s not going to work the second time,” he said in an interview with Bloomberg News. “It’s adding up staggering amounts of debt, staggering amounts of debased currencies. It’s going to cause more distortions, and we’re going to have more currency turmoil.”
The U.S. and U.K. governments’ taxpayer-sponsored bailouts of troubled banks were “unbelievable economics” and “terrible morality,” he said.
Rogers studied at Balliol in the 1960s and coxed Oxford to victory in the 1966 boat race against Cambridge University. Balliol, founded 747 years ago, educated British prime ministers including Harold Macmillan and writers such as Graham Greene.
Rogers, who lives in Singapore, traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include “Adventure Capitalist” (Random House/Wiley) and “Investment Biker.”