Jim Rogers on U.S. Dollar

Talking to Steve Forbes at Forbes.com, Jim Rogers weighed in on the U.S. dollar and why he's holding it at this time, as well as why he might even acquire more of the greenback sometime soon.

It's interesting to listen to Jim Rogers chat up the U.S. dollar, as over the long term he has called it a "flawed" currency in the past, and continues to believe that to be the case.

Even so, he is invested in the dollar, and has been since around early 2011.

When asked if the reasoning behind investing in the U.S. dollar was because it's in a "bear market rally?," Rogers said this:

It’s a bear market rally, yes, in my view. Although when I walk out of here, I may buy more. No, I don’t see it as anything more than a bear market rally. But I own several currencies around the world. There may be a time ... in the foreseeable future, when all of us are going to be getting rid of our paper money, because it’s being debased all over the world. One reason I own the dollar is because everybody’s panicked about the debasement of these other currencies. Paper money is suspect.

Also being an expert on gold, Rogers knows we're in a gold correction at this time, and expects it to drop more before recovering to continue its upward price run.

That means for a season the U.S. dollar will continue to flourish, as it has little in the way of competitors in the short term, making it the preferred place of safety for investors, as the euro continues to plunge in value based upon the sovereign debt crisis in Europe.

Peter Schiff Says Run from U.S. Dollar

The payroll report on Friday confirmed what many of us knew, that the outrageous monetary and fiscal stimulus has failed, and that sends a signal to all of us that we should flee the U.S. dollar, says Peter Schiff.

Rather then following in the footsteps of other countries, which have been removing stimulus, the U.S. is actually planning on increasing “quantitative easing,” which is just a fancy phrase for printing money to acquire government debt.

That will bring even more pressure on the dollar, and drive its value down even more. The U.S. Dollar Index has dropped eight weeks in a row, and will probably continue to do so in light of the misguided government policies.

If quantitative easing resumes, which at this point appears inevitable, some believe it will kill the dollar as we know it. One of those is St. Louis Federal Reserve President James Bullard.

US Dollar Strengthens on Sovereign Debt Crisis

While gold is the top place investors are putting their money for a safe haven, the US dollar has been strengthening against other currencies as the sovereign debt crisis in Europe continues to unfold.

There aren't many safe places to put money now, as the stock market crashed and equities continue to be very volatile in the midst of extraordinary economic pressures.

This week the US dollar did enjoy its best gain since October 2008, a testament to the weakness of paper currencies, not the strength of the dollar.

The dollar continues to gain against the failing euro.

Central Banks Fleeing U.S. Dollar

Banks are fleeing the U.S. dollar at an unprecedented rate as 63 percent of new cash is going into the euro and yen rather than the dollar over the last three months.

A decade ago the U.S. dollar accounted for about 66 percent of investment for the new cash in banks, while today it stands at only 37 percent.

Overall the greenback is only 62 percent of the currency reserve at central banks, the lowest level ever that has been recorded, according to the International Monetary Fund.

The obvious reason is it's losing it's value at an unprecedented rate, as it's down 10 percent over the last 90 days alone, generating interest in abandoning the U.S. dollar as the reserve currency and looking at alternatives, although that would take time to happen.

In the short term, money will continue to flow away from the dollar as the extraordinary run of the printing presses of the Federal Reserve and the outrageous Obama administration bailouts continue to hammer the U.S. dollar into the ground.

Government, central banks and investors are getting more concerned about the U.S. dollar going forward, as the almost non-existent return isn't worth the money they've invested in it to cover the growing U.S. government debt.

"He's (Bernanke) in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

With the horrific decision by the Obama administration to bail out everything, it has left no viable options on the table, because if the Federal Reserve raises interest rates, it'll smother any economic growth and clobber the housing market, which would slump back into a horrid situation it hasn't even escaped at this time.

On the other hand if he keeps things like they are, inflation could go as high as into the triple digits, collapsing the economy into something we would no longer recognize.

As Schiff and others have rightly concluded, "The stimulus is what's toxic -- we're poisoning ourselves and the global economy with it." Unfortunately no one that has power to make monetary decisions has the political and personal will to step in and stop the monetary madness of the Obama administration and the Federal Reserve.

Jim Rogers: Dollar May Rally

While Jim Rogers has no faith in the U.S. dollar in the long term, and expects it to be replaced some time as the world's reserve currency, at the same time he's holding on to his dollars at this time because everyone understands the weakness and poor future outlook of the dollar, and have priced it into it, and so that could set things up for a rally, that while not sustainable, could make some money for investors fairly quickly.

So Jim Rogers is holding his U.S. dollars in order to offload his dollar holdings if and when a rally starts.

Rogers added that the bull market in U.S. bonds is winding down, and equities will go nowhere overall over the next 10 years or so, and will largely move sideways.

US Dollar Play | Invest in Commodities

One of the more obvious play with the U.S. dollar is to invest in commodities. That can be done through futures, funds and stocks linked to raw materials.

A commodity index fund is another great way to invest in commodities over the long haul, which will continue their bull run overall once the demand for infrastructure materials resume from countries and companies spending more money.

No matter what happens to the U.S. dollar though, which will obviously continue to lose its value, commodities will continue to rise based on the demand from growing middle classes in emerging markets.

So while commodities are a great play against the weakening U.S. dollar, they are also a terrific plays in and of themselves based on demand and supply; along with tight credit markets.

US Dollar Play | US Multinationals

Many investors concerned over the unknown risks of investing outside the U.S. instead will focus on U.S. multinational companies which have a significant percentage of their business outside the U.S.

Some large institutions are looking for U.S. multinationals that do over 50 percent of their business outside the U.S. which are large and obvious companies like General Electrice (GE) and Waters Corp. (WAT), among many others.

What should be looked for is companies with history and proven track records, most of which have been performing pretty well considering the difficult economic circumstances we're in.

US Dollar: Imminent Collapse?

The forces that have allowed the US dollar to remain strong seem to be coming to an end, and it could be any time that it collapses under the weight of its inherent weakness.

A number of dollar experts, including Peter Schiff and Jim Rogers, agree with the sentiment that the US currency has nowhere to go but down.

Forced liquidation and deleveraging have kept the currency artificially high, but now those positions are unwinding, and so they won't prop up the US dollar any longer.

This will have a significant impact on dollar related investment vehicles like US Treasuries and bonds.

With the Federal Reserve running the money printing presses non stop to pay off its promises, there's nowhere for the US currency to go but down. Inflation is just around the corner, and it's a matter of when, not if, it comes.

Commodities have already started to rise, especially the metals, as gold and silver enjoyed a big jump recently, and that will continue throughout 2009. Some think platinum prices will also rise in 2009, even though the demand from the auto industry has slowed.

As far as the future of the US dollar, it's going to plummet in value in the near term for sure, while some are even beginning to think the unthinkable, that there will emerge an alternative currency the world favors, just as the pound was dropped for the US dollar long ago.

China is even beginning to experiment internally with using its own currency for transactions within its more successful economic regions, rather than the US dollar. We know the reason that experiment is going on, as the China currency could sometime emerge as the favorite to use in global transactions.

Any investment connected to the US dollar will suffer going ahead, and the dollar will not continue to retain its strength or go up over the long term. It will of course have its small seasons of upward movement, but overall the chart will go down.

This will get even worse because of the US government interfering in the free market and bailing out tons of poorly managed companies and sectors, all in the name that they're "too big to fail." Too bad, as the economy always cleans and flushes out the poorly run companies and emerges stronger than in the past.

That won't happen now as taxpayer money will be used to support the badly run companies and allow them to last in the face of the quality companies that would have taken over the bad.

In the short run, the US dollar will remain the currency of choice, but I don't see how going ahead, and the failed big government policies that are destroying the dollar, will allow the currency to remain as its been. It won't happen right away, but it will happen unless we get people in the government that understand monetary policy.

The future of the US dollar is bleak, and it will buy less and less going forward.

For the Treasury bond, the reason it's in a bubble and will collapse, is nations are starting to cut back on buying it, and speculators have entered the market giving it the illusion of strength. In reality, the US government will be the final holder of the bonds, and nobody will be there to buy them. Then what will they do?

The US dollar is heading for a fall, get out of them while you still can.