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Henry Bonner

Jim Rogers: Governments Will Loot Pensions, Savings – Hold onto your Gold

Jim Rogers co-founded the Quantum Group of Funds in 1973. He has warned investors that governments could loot savings and pension plans soon. With gold coming down again over the last month, I asked him about his gold holdings now.

Why still own gold?

“You see, there is going to be chaos out there over the next decade,” he began. “It could be a monetary disaster or even war. This turmoil could come from a gigantic debt problem, for instance, which could cause world economies to fall apart as well. Politicians don’t know what to do besides printing money – so that’s what they end up doing. We will see a wave of turmoil from all this that will surely take gold higher.

“I am on the record extensively since the fall of 2011, saying that gold would be going down for quite some time. Well, correcting, I should say. That is still happening; I am not rushing in to buy gold. I also have not sold any of my gold. A 50 percent correction from the top would put gold under 1,000 dollars. I am not predicting that will happen, but it is possible.”

Could certain countries really go to war over the next 5 years?

“Well, wars start with absurd actions by absurd politicians – they always have. I wouldn’t expect there to be a war over the Ukraine, for instance, or over a few rocks in Asia. But wars always seem completely unthinkable until they happen.

“When you look at how wars start, it’s always one group of politicians doing something foolish, followed by another group doing something even more foolish. Before you know it, they go beyond the point of no return. Take the First World War, for instance. Nobody could have conceived that such carnage and destruction would happen. Within six months, people were looking at each other and asking ‘How the hell did this happen?’ It was insane and absurd. And yet, it went on for four more years, costing millions of lives. This can happen.”

Mr. Rogers adds that conflicts become more likely when people are becoming poorer. Wars often occur during economic depressions, when there is mass poverty and unemployment. And we are headed right for such a period:

“In the next two or three years, when we start to have more economic problems and more inflation, it will become more likely that a war will break out. Wars typically start when people are unhappy about the economic situation and suffering from high inflation or food shortages. We are getting closer to the day where the price of wheat and the price of sugar go much higher, causing discontent among populations around the globe.”

How will governments react to a global economic decline? How will they keep themselves afloat?

“For one, there will be more confiscation of wealth,” says Mr. Rogers. “Americans and Europeans have already made it legal to take money from private bank accounts, or at least parts of them, in order to bail out banks. They will likely help themselves to pension plans too.

“Gold and silver should provide investors some protection against government confiscation,” he says. “They will probably go for bank accounts and retirement funds, because they need cash. In fact, that is already happening in Argentina and Poland. Gold and silver are no longer part of the monetary system, which they were back in the 1930s’ when they last confiscated gold and silver. From the government’s point of view, gold and silver are not ideal – it is money they need.”

Is the broad stock market in a bubble? Can it keep going any higher?

“I don’t know if the stock market is at a peak,” says Mr. Rogers, “but stocks are certainly at an all-time high. I am not inclined to buy things that are making all-time highs. I would rather buy things that are depressed. For instance, I am more interested in stocks in Russia, China, and Japan – because these markets are depressed. I am not at all keen on buying the U.S. stock market now.”

 

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Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment.  Because of significant volatility,  large dealer spreads and very limited market liquidity, typically you will  not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally  associated with  domestic markets, such as political,  currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.

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