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Jim Rogers on Fed Policy: 'This Is Absolute Insanity'

By Dan Weil   |   Monday, 11 Nov 2013 06:23 PM

For years star investor Jim Rogers, chairman of Rogers Holdings, has been ripping the Federal Reserve and other central banks for their massive easing programs. He sees no reason to feel differently now.

"This is absolute insanity, what's going on," he told Reuters TV.

"It's not just the Fed, it's central banking. This is the first time in recorded history that all major central banks are printing a lot of money trying to debase their currencies. The world's floating around on a huge artificial sea of liquidity."

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The European Central Bank cut its benchmark interest rate to a record low Thursday.

And what's the end game?

Eventually, Rogers asserts, "it's going to dry up. And when it dries up, we're all going to pay the price for this madness."

He doesn't expect the Fed to taper its quantitative easing anytime soon. The central bank is buying $85 billion of Treasurys and mortgage-backed securities a month.

"Mr. Bernanke's certainly not going to do it. He wants to get out while he can before it all falls apart," Rogers said. Fed Chairman Ben Bernanke's term ends Jan. 31. President Barack Obama has nominated Fed Vice Chair Janet Yellen to replace him.

"Mrs. Yellen undoubtedly will not do anything at first because she knows – I hope she knows – that this is going to cause problems when they stop producing so much money," Rogers said.

"So I would suspect they will go home for a while—maybe [until] 2015."

And what's going to happen when the Fed finally shifts policy? "The markets are going to react and react pretty badly, and then they'll probably loosen up again," Rogers said.

"These are not very smart people. They're government bureaucrats, and they think like government bureaucrats."

So what should investors focus on next year?

"All you have to do is watch the central banks of the world, because if they're all going to continue to print money, then a lot of it's going to wind up in financial markets," Rogers said. "That's the most important thing that's going on in the world right now."

Rogers has been bullish on China for years and remains that way. "I don't have any worries about China. Every country that evolves has economic setbacks, political setbacks," he said. In the United States, for example, the 19th century didn't go so well, with a civil war and 15 depressions, Rogers says.

Actually he does admit to one worry about China — a possible water shortage. "If they don't solve the water problem, there is no China story," Rogers said. "Now, they know that too, and they're spending a lot of money trying to sort out the problem."

Rogers isn't alone in his disdain for Fed policy.

Simon Baker, CEO of Baker Ave. Asset Management, says that only the wealthy, who own stocks and other appreciating assets, are benefiting from the Fed's easing.

"Main Street is a long way from back," he told Yahoo. "If the question is, 'Is Main Street happy?' I don't think so."

Baker labels the Fed's accommodation "a massive, $3.7 trillion redistribution of wealth."

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