Jim Rogers sees Renminbi replacing US Dollar as world reserve currency

BusinessIntelligence
Tuesday, January 20, 2009

Legendary global investor Jim Rogers said the Renminbi may possibly replace the US dollar as the international reserve currency 15 years from now.

Addressing the Asian Financial Forum in Hong Kong, an event that brought together about a thousand participants from around the globe, Rogers said he found Asia to be the place where "the world is changing" as he toured the world in 1990 through 1992.

"This is going to be the new centre of the world, not just the financial but the political world," he said.

The only currency that could replace the US dollar "this year" would be the euro, while the only conceivable currency that can replace the dollar as the reserve currency "15 years from now" is renminbi.

Rogers said he believed China will rise despite possible setbacks.

The United States also experienced setbacks and had various problems back in the 19th century, which, nevertheless, did not stop it from becoming the greatest success of the 20th century, he said.

The US dollar, on the other hand, is falling, he said, citing the fact that China is now the largest creditor nation while the United States is largest debtor nation.

"The Renminbi is big enough. It's liquid enough," he said, adding that the question was only academic in the sense that the renminbi is still a blocked currency.

He accused US authorities of consciously trying to devalue the US dollar by flooding the market with liquidity -- or in his words, "turning on the printing presses" -- and said anyone chasing the rally in government bonds is making a "terrible mistake."

"The idea that you can fix a period of excess borrowing and excess consumption by more borrowing and more consumption to me is just ludicrous," he said.

The projected plan to bail out the US economy by printing more money and boosting consumption could lead to even bigger problem. "The idea that you can solve a period of excessive borrowing and consumption with more borrowing and more consumption and destroying more balance sheets, to me, is ludicrous on its face," Rogers said.

Rogers said protectionism, one of the key pillars of U.S. President-elect Barrack Obama's presidential campaign platform, could push the U.S. economy into big trouble, citing the historical anecdote that the US congress passed a protectionist bill after the 1929 stock market crash to send the US economy into a long depression.

Underscoring his convictions, Rogers began his speech by showing pictures of his two young children, both of whom he said have Swiss bank accounts and speak Mandarin.

Rogers said his elder daughter, who is five years old, is in school in Asia and speaks fluent mandarin thanks to a governess who can speak fluent Chinese.

The other younger daughter was also learning mandarin.

"The single most important advice I can give you is teaching your child mandarin," he said, urging investors to sell US dollars when it peaks in the near term.

Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%. The Quantum Fund shot to fame after making more than US$1 billion betting against the British pound in early 1990s.

The Asian Financial Forum was hosted by the Hong Kong Special Administrative Region government and Hong Kong Trade Development Council. Prominent speakers discussed the challenges and opportunities facing Asian economies.