Investment superstar Jim Rogers says U.S. interest rates will increase for years, thanks to the Federal Reserve's easy monetary policy.
In a wide-ranging and exclusive interview with Moneynews, Rogers says that the Fed may temporarily be able to hold the line on short-term rates but that, ultimately, the entire yield curve is headed higher.
"You could in theory have short-term interest rates stay low, while you have long-term interest rates go up," Rogers says.
"The central bank might be able to control short-term interest rates for a while."
But that won't last, Rogers says.
"There's more inflation coming, the Federal Reserve is debasing the dollar. That's going to make medium-term and long-term rates go higher."
Bottom line: "All interest rates will be going higher over the next few years because of inflation, the Fed's debasing of the currency, and several other reasons."
While interest rates are rising, the dollar will be falling, Rogers says.
"It breaks my heart, but yes, of course, the U.S. dollar is now a terribly flawed currency," Rogers says.
"As recently as 1987, the U.S. was a creditor nation internationally. Now we're the largest international debtor the world has ever seen."
The U.S. owes more than $13 trillion in foreign debt, and that obligation is increasing at the rate of $1 trillion every 15 months.
Meanwhile, Rogers says, "the Federal Reserve is out there doing its best to drive the dollar down more. They're on official record as saying they're going to debase the U.S. dollar. That's never been good for any country."
On another subject, Rogers reiterates that the Treasury Department and Fed are foolish to prop up Fannie Mae and Freddie Mac.
"They should have let them go bankrupt," he says.
"First of all, every prospectus they [Fannie and Freddie] put out says they're not part of the U.S. government, that they aren't guaranteed," Rogers points out.
"Anybody who can read a prospectus can see the companies were over-leveraged, over-extended, and in trouble. A lot of people shorted these things because they could see the problems."
But the government is stepping in. "So now you have 300 million Americans on the hook for $5 trillion of debt that some crooks and incompetents put together," Rogers says.
"We're stuck with it. The entire national debt of America is $5 trillion. And in one weekend that was doubled to $10 trillion by people who were never elected to anything."
Rogers says more bank failures are on the horizon. "There will be more coming over the next few years I assure you, partly because there were huge excesses in the past five to 10 years."
The government just compounds the problems, he argues. "Instead of correcting this in the way that I would correct it, they're making more mistakes," he says.
"And I'm afraid we're going to have one of the worst decades we've had in a long time."
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