Jim Rogers Sees More Currency Turmoil

In an interview with CNBC today, billionaire commodity bull and expert Jim Rogers said he sees continual turmoil in the currency markets, although in the short term he has positions in U.S. dollars, renminbi and euros.

This is the result of the horrendous decisions of the Federal Reserve and other central banks around the world to continue to "stimulate" the economy with money created out of thin air, which is extremely disruptive to the market over time.

Rogers says he sees the renminbi possibly tripling over the next ten to twenty years. He said, "I own the renminbi. Every time I can, I buy more renminbi. I expect the renminbi to double or triple in the next decade or two." He did say he doesn't have a position in the British pound at this time. Rogers added he owns no U.S. stocks either.

As for his positions in gold, silver and other precious metals, Rogers continues to say he won't be selling any of those. "The way to protect yourself at a time like that, historically anyway, has been to own real assets. Those are my longs, and currencies," said Rogers.

Rogers recommends for investors to monitor the currencies of the world. When quantitative easy results in increasing currency turmoil, he says that's the time to buy commodities.

He concludes that as the near the latter part of this decade it's doubtful very many investors will hold paper money, as it's increasingly falling out of favor as debasement pushes the value down.

China Ready to Drop Dollar Peg?

China U.S. Dollar Peg

Although it may not happen quickly, it looks like China has decided they're gradually going to remove the dollar peg with the renminbi, saying it was a temporary measure to deal with the economic crisis.

It's hard to tell if this is a consensus with the Chinese, or one faction making an assertion while the others are holding to a policy of needing a stable exchange rate between China and the U.S.

Confirmation from the Chinese government hasn't come yet after Zhou Xiaochuan, governor of the People’s Bank of China, made the comments of changing the peg sometime in the near future.

Of course when thinking of the Chinese, we must take into consideration their idea of what "near" means and what ours is. In this case, they seem to be thinking of a period of two to three years, tying it into the low levels of Chinese exports since the global economic crisis began.

China U.S. Dollar Peg

U.S. Dollar | US Dollar Way Overvalued Says Study by Peterson Institute for International Economics

U.S. Dollar

The U.S. dollar is "seriously overvalued," mostly against the Chinese renminbi and some other Asian currencies, according to a new study published on Wednesday.

The Peterson Institute for International Economics, a Washington-based think tank, said the majority of the 29 currencies it studied need to appreciate against the dollar, with a large rise especially needed by the Chinese currency.

"The principal counterpart to the overvalued dollar is the undervaluation of the Chinese renminbi, which would have needed to appreciate about 21 percent on a weighted average basis and about 40 percent against the dollar to achieve equilibrium," said the study by economists William Cline and John Williamson.

Investor flight to the dollar safe haven since last year has pushed the U.S. currency up by about 10 percent, which on top of an estimated overvaluation of about 7 percent a year ago made for an overvaluation of about 17 percent by March this year, the study said.

But the dollar slid to its low in 2009 on June 1 against the euro and a basket of currencies amid optimism the prospect of a global economic recovery boosted riskier assets.

Despite the dollar's recent slump, the study said the currency remained "substantially overvalued."

Cline and Williamson said economic imbalances caused by the deficit and overvaluation of the dollar over the surplus and undervaluation of the Chinese renminbi posed systemic threats.

"It is important that as the world emerges from the current crisis these imbalances be corrected," they said.

To rebalance the global economy, Cline and Williamson argued China should change its peg from the dollar to a basket of currencies. Alternatively, China should resume the upward crawl of the peg against the dollar.

"Unfortunately, the most recent evidence points in the other direction, as the policy over the past several months of keeping the renminbi unchanged against the dollar has remained intact, despite the dollar's reversal toward a declining trend subsequent to its peak in early March."

"China has again begun to ride the dollar down," they added.

U.S. Dollar