Exclusive to STR
August 6, 2008
Anyone who publicly calls for the abolition of the Fed gets my attention. Add to his resume the fact that he rode a motorcycle across China once, circled the planet on the ground twice (the second time with his beautiful bride), ran the New York City marathon three times, and is one of the world’s most successful investors as well as a best-selling author, and I’ll sit and take notes.
I did my note-taking while reading Jim Rogers’s book, Adventure Capitalist: The Ultimate Road Trip, which documents his world-spanning odyssey at the turn of the century with his wife, Paige Parker. Unlike other books you can’t stop reading,
In the early ‘90s, James B. Rogers, Jr., the oldest of five boys from
Besides this, the man simply loves adventure, and his first trip only left him hungrier for more. “If the [millennium] trip killed me, I would die happy, pursuing my passion. And that was better than dying on Wall Street someday with a few extra dollars in my pocket.”
Paige said yes, but wasn’t thrilled about doing it on a motorcycle. She encouraged him to consider going in a car.
He ended up with a custom-built yellow Mercedes with a hardtop retractable roof, featured on his book’s cover. It was a two-seater with four-wheel drive, boldly cartoonish in appearance. The choice of Mercedes was easy: Their dealerships covered the earth. “Every dictator and Mafioso in the world drives a Mercedes,” he writes, “even in countries with no roads to speak of.” For this we have government to thank, he says.
He went with a hardtop convertible to prevent the top from being slashed and had a diesel engine installed because, unlike gasoline, diesel fuel was available everywhere. He added an extra fuel tank and a secret compartment for hiding money, and was talked into going with an automatic transmission.
Their trip began in late December 1998 in
Instead of people leaving
As they crossed into
“In most places around the world, the currency is like a thermometer,”
According to a successful Turkish businessman with whom they dined one evening,
“You do not accomplish something like that in a week or two,”
His optimism about
The next day his scarred laptop arrived from
“The best capitalists are in Communist China,”
What are the keys to
For one, the expatriate class plays a huge role:
The country has a vast network of overseas Chinese – in
And the Chinese have a great work ethic:
Still, the Chinese desert is a very desolate place. It is called the Takla Makan, meaning “He who goes in does not come out.” Yet, hundreds of years ago the Chinese figured out how to irrigate the few towns that exist there, by building tunnels under the desert that draw water from the mountains hundreds of miles to the north.
Driving across the bleakest of deserts, we were periodically brought up short by the sight of tomatoes, pumpkins, and melons growing. The people of these oasis towns were so proficient in capturing water . . . that they were able to hose down the streets to reduce dust.
They ate at a Chinese restaurant where the food was not yet dead.
Huge amounts of money and votes lie with the rich Japanese rice farmer, which explains why rice prices in
The cost of a house in
Because of regulation and inflexibility, the creativity that made the country great is fast disappearing.
There are a million
By way of illustration, he offered this anecdote: While ordering food in a Korean restaurant in
Throughout Africa Rogers found “vast numbers of people with talent and drive willing to labor from dawn to dusk, their work ethic no less powerful than that of the Chinese.” But war and corrupt politics were limiting opportunities.
Most foreign aid to
They traveled down
In late 2000 when they arrived,
“Savagery has been a way of life here since 1947,”
“The country epitomizes bureaucracy, chauvinism, and protectionism run amok.” If you’re a foreigner wishing to launch an investment project in
With an enormously high living standard,
And of course, freedom of expression is greatly curtailed.
In spite of its anti-immigration laws,
In Darwin, a frontier town, women in the restaurant/bars dressed half-naked because of the patrons, who were mostly miners and ranch hands. Women would commute by air from places like
Effectively socialist during the 1960s and 1970s, New Zealnd turned itself around in 1984, going from a protected agrarian economy to an open free market economy. Then in 1996, a new party, populist and xenophobic, took office and their currency soon dropped by 70 percent. The huge immigration that had characterized
“What I saw in
And yet, Paige fell in love with the country and wanted to move there.
Driving through the country, seeing that everything was so expensive and knowing the government had been borrowing heavily since 1996,
Immigrant Amish from the
They entered the country in Yacuiba and found a bustling market because thousands of people from overpriced
It was very dangerous when he was there in 1991. With peace,
Along with a tradition of bad politicians,
They were allowed to photograph the canal but not the nearby welcome sign. The guards there told them Panamanians did not like tourists, especially American tourists.
They spent two weeks driving north through the country. On his previous trip, decent roads in
The country’s state-run oil monopoly, Pemex, nationalized in the 1930s, accounts for 40 percent of the government’s revenues. In 2001, Pemex employed 137,000 workers to produce three million barrels of oil a day, about twice the workforce of countries such as
Gas stations are located where the government and its cronies dictate, rather than where the market dictates. And the filling stations don’t take credit cards. One station did, and it promoted the revolutionary move with a huge banner: WE TAKE VISA.
Foreign investment has declined. Tens of thousands of jobs have left
They had to buy a tourist license to leave the country. It took them three hours and visits to three different offices.
During their absence, government was saying inflation was in check and prices were stable. But when Rogers and his wife got home, they were shocked at how much prices had gone up. Still, the
In 1996 the government began using “hedonic adjustments,” a term invented by the Bureau of Labor Statistics, in reporting price increases. According to the
In 2002, fully 56 percent of the figures that go into the
The hedonic adjustments, of course, provide cover for the effects of the Federal Reserve’s printing press. The Fed was trying to save Wall Street and the stock market, but instead was creating a real estate bubble.
Alan Greenspan was still the Fed chairman in 2002. Bob Woodward had tried to promote Greenspan as a genius in his book Maestro. But Woodward “knows as little about what Greenspan does as the family cocker spaniel.” Greenspan’s history was replete with failure. That’s why he had a government job.
As head of the Council of Economic Advisors in 1974, Greenspan’s solution to inflation was to issue little
When Long-Term Capital Management was on the verge of collapse in 1998, many Wall Street firms stood to be aversely affected. They went crying to Greenspan, who, instead of letting LTCM fail and thus clean out the system, started pumping money into the system to bail out his friends.
In the 18 months that followed, NASDAQ soared, because new money tends to flow into financial assets first. On TV everyone was going nuts over the “New Economy” and the bull market. Yet the economy was going down, and profits had peaked. About 30 big stocks were distorting the picture. Take them out, and it was very easy to see that a bear market was well under way.
Greenspan had panicked. He printed money. “He caused the bubble, pure and simple.” Rather than take the punch bowl away, he kept refilling it.
In 2001, Greenspan hit the panic button again. The printing presses ran harder that year than ever before. Bush was spending as fast as Greenspan could print. Most Americans were thinking, “Well, things aren’t so bad after all.”
The maestro had perpetrated a housing and consumption bubble by driving down interest rates.
Both Greenspan and Bernanke stated they will do everything they can to prevent prices from declining in the
He drove around the world when he did “to get a measure of the world’s heart rate as it jumped a millennial divide.” “The largest and most prosperous city at the end of the last millenium was
“I promise you that the time will come, however unfortunate, if not four hundred years from now, then certainly by the turn of the next millennium, that few will be able to name a single American president, not even George Washington.”
He quotes Ernest Hemingway:
The first pancea for a mismanaged nation is inflation of the currency; the second is war. Both bring temporary prosperity; both bring permanent ruin. Both are the refuge of political and economic opportunists.
Though written six years ago,