Viewpoint: Jim Rogers2 of 4www.qfinance.com
Do you believe Singapore or Hong Kong more likely to emerge as Asia’sleading financial center?
I think it’ll be Singapore, at least in the medium term, because no one really knows what’s going to happenwith Hong Kong and China. Dubai says it wants to, but Dubai is essentially a short-sell now. There’s alsoTokyo. Over the last 40 years, Tokyo should have been emerging as a financial center. On paper it lookslike it ought to be the world’s financial center. The trouble is that, for whatever reason, the Japanese justdon’t want to open up to the outside world and keep doing ludicrous things, like having their interest rates atalmost zero.
Why do believe that Dubai was a short-sell?
Dubai’s “model” has been to develop the country and the economy based on real estate speculation. Theydon’t have any oil; they ran out of oil. So they’ve come up with all these fabulous plans on paper to become amedia center, to become a high-tech center, an entertainment center, etc. It’s all based on massive amountsof real estate speculation with borrowed money. Now, maybe their cousins in Abu Dhabi will continue to bailthem out, but it’s going to be a big, big, big bite to bail out.
What lessons do you think the developed economies can learn from thebanking crisis? How should they be reforming their financial systems toensure they can recover?
The lesson that they should learn is to let the market work. During the past 15 years, in the United Statesespecially, they refused to allow the market do its work. Alan Greenspan swore every day that he believedin market forces, but every time there was a problem he over-rode the market. If he had allowed “Long-term Capital Management” to go broke, we would not have had these problems now. That allowed peopleat Bear Stearns and Lehman’s, who were incompetent before, to carry on. Instead of licking their woundsand learning how to drive cabs, they went off looking for the next fish to fry. At the time everybody thoughtGreenspan knew what he was doing. But if you look back at some of the things he said, we now knowhe was a fool. Through his policies, he goosed up a consumption and a housing bubble. He said, “Thederivatives markets are great. They’re a fabulous thing to help the financial system.” He came out and saidall these things out loud, officially, under oath.
Do you think derivatives will have to be more tightly regulated?
There’s no need. The markets have taken care of that. Do you think anybody is out there writing derivativesnow? There are simply no buyers out there. The regulators still don’t understand derivatives.
What is the commercial bank of the future going to look like do you think?
They are going to take deposits and make loans to people they know, and they’re going to make a living.Securitization will come back someday but, if and when it does, it will be on an entirely different basis. It willbe pretty straightforward and transparent. One thing that was lacking in the market before was transparency.Nobody could see what they were buying or selling. Some of these derivative instruments had offeringcirculars of over 1,000 pages, which I doubt anybody read, including the people who wrote them. Nobodyknew what was in this stuff.
Were the people who bought those things greedy or naive, or both?
Well, I guess they were certainly naïve. I hope they were naïve, maybe they were just crooks. Greedy? Well,everybody was out there trying to make as much money as they could. The first securitizations were fine.