Daily Bell: We've interviewed you before. Thanks for spending some time with us once again. Let's jump right in. What do you think of the Chinese economy these days?
Jim Rogers: There is some overheating and inflation, which they are wisely trying to cool – especially in urban, coastal real estate. They have huge reserves so will suffer less than others in any coming downturn.
Daily Bell: Is price inflation more or less of a problem?
Jim Rogers: More. At least they acknowledge inflation and are attacking it. Some countries still try denying there is inflation worldwide. The US is even pouring gasoline on these inflationary trends with more money printing instead of trying to extinguish the problem.
Daily Bell: Is China headed for a setback as you suggested last time we spoke?
Jim Rogers: Did I say a setback or a setback in real estate speculation? I think you will find it was the latter. Yes, the setback in urban, coastal real estate is under way.
Daily Bell: They are allowing the yuan to float upward. Good move?
Jim Rogers: Yes, but I would make it freely convertible faster than they are.
Daily Bell: Will that squeeze price inflation?
Jim Rogers: It will help.
Daily Bell: Why so many empty cities and malls in China? Does the government have plans to move rural folk into cities en masse?
Jim Rogers: That is a bit exaggerated. China has been overbuilding ever since I have been visiting. There is at least eventual demand for much of it, but that does not preclude some bankruptcies in the future.
Daily Bell: Is such centralized planning good for the economy?
Jim Rogers: No. Centralized planning is rarely, if ever, good for the economy. But the kind of construction you are describing is at the provincial level – not the national level.
Daily Bell: The Chinese government is worried about unrest given what is occurring in the Middle East. Should they be?
Jim Rogers: We all should be. There is going to be more social unrest worldwide including the US. More governments will fall. More countries will fail.
Daily Bell: Are they still on track to be the world's biggest economy over the next decade?
Jim Rogers: Perhaps not that soon, but eventually.
Daily Bell: Any thoughts on Japan? Why haven't they been able to get the economy moving after 30 years? Will the earthquake finally jump-start the economy or is that an erroneous application of the broken-windows fallacy?
Jim Rogers: It has been 20 years. They refused to let people fail and go bankrupt. They constantly propped up zombie companies. The earthquake will help some sectors for a while, but there are serious demographic and debt problems down the road.
Daily Bell: The Japanese were going to buy PIGS bonds. What will happen now? Does that only leave China?
Jim Rogers: Obviously the Japanese have other things on their mind right now. I think we are getting closer and closer to the point where someone in Europe is going to have to take some losses, whether it's the banks or the countries, but somebody has to acknowledge that they are bankrupt. The thing that the world needs is for somebody to acknowledge reality and start taking haircuts.
Daily Bell: Are you more optimistic or pessimistic about the EU these days? Last time you told us the world needed the euro – a big market with breadth and depth. But you weren't sure it was going to last. Any new insights?
Jim Rogers: I didn't say that the world needed the euro, I said it would be good for the world; we need something to compete with the US dollar. On paper the euro would be a great competitor. However, as I have said before, it is a political currency rather than an economical currency, and I would suspect that this pushes the euro closer to a moment of truth.