Economy

US recession not over yet: Rogers

(Xinhua)
Updated: 2010-10-06 16:05

NEW YORK - Last month, the US government officially declared the latest recession, which started in December 2007, was already over in June 2009 when recovery began. But legendary investor Jim Rogers said otherwise.

"The US has never got out of the first recession," said Rogers, a co-founder of the famous Quantum Fund in 1970 with George Soros, told Xinhua in a recent interview.

The official declaration on the end of the recession means any future downturn in the US economy will be considered a new recession and not a continuation of the recession that began in December 2007, which Rogers didn't agree with.

"As you know, unemployment in the US keeps going up, it has not been going down," Rogers said. The unemployment rate was 9.6 percent according to latest statistics from the Labor Department.

"The US is now much deeper in debt, has much deeper problems than we had before."

"The financial sector is still facing the largest risk right now," he said, adding that the financial sector is facing political risks.

"The politicians right now hate finance," Rogers said, adding that US politicians wanted to win elections by blaming and attacking the financial industry.

"If you have a child, make sure he/she does not get an MBA, it is the wrong thing to do," He said. That is because, in his view, the US financial industry will have a terrible time for the next 10 to 30 years, he said.

On the Federal Reserve (Fed)'s new policies, Rogers said: "They don't know what they are doing."

The Fed said a few weeks ago that it would take steps to stimulate the economy when it was needed, in other words, a second round of quantitative easing policy. After the announcement, the US dollar fell to 5-month low against the euro and the treasury notes yields went down to record low.

"All they know is to print money," said Rogers, "but it's not good for America, it's not good for the world."

He said he believes the quantitative easing policy could not solve the problem fundamentally but to "put the problem out to the future" as it would get "even worse" in the long term.

As a strong believer in the free market, Rogers argued that in such circumstances, the US government should let the market run its course, and the economy should pay the price of over-spending and insufficient savings by itself.

He also said no matter how the economy developed in the future, the commodity market would go all the way up.

"if the world's economy gets better, shortages will develop, the commodities will go higher. If the world's economy does not get better, government is going to print money and create more liquidity in the market, which means high prices in commodities," he said.

When talking about the equity market, Rogers said it was not so attractive to him as the commodity market, but there were still some sectors with investment potential.

"Some parts of equity markets will do OK. water treatment, for instance. Most of the world are facing water problem."

As always, he was firmly bullish on agricultural and tourism sector. "They are the sectors can not be affected by the economic situation and that's the sectors you should invest."