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Biz / TechFriday, July 22

Jim Rogers on Brexit

To get an insight into where things are heading after Brexit, NHK World's Hideki Yabu spoke with Jim Rogers in Singapore. He's a high-profile American investor, and was a co-founder of the Quantum Fund with George Soros.

It's been nearly a month since people in Britain voted to leave the European Union. Ever since the surprise move, markets around the world have remained volatile.

Rogers bet on the decline of the British pound years ago. He has been an active trader in stocks, currencies, commodities, among other things.

Many markets seem to have recovered and stabilized from the initial Brexit shock. But Jim Rogers thinks the UK should be prepared to deal with major disruptions.

"Before this is over, we're going to have a serious crisis in the UK. The UK has huge debts, the UK has a huge balance of trade deficit, the UK has a huge government deficit. And if Scotland leaves, which they say they might, that takes the oil, a lot of the oil. England loses a lot of its income at the point. If that develops, the city of London, the financial district, will come under more and more pressure. The Europeans are already saying they're going to take their financial business away from London now because it's not part of the EU. Paris, or Frankfurt, or Amsterdam, or someplace to get a lot of that business," Rogers said. "The UK is going to be like Portugal, or Poland, or Spain, or Italy-these were great countries once upon a time."

Rogers believes the effects of the Brexit vote may not be immediately felt in Asia. But he predicts a spillover hitting the region, through financial channels.

"It's not going to have much direct impact, because most Asian countries don't trade that much with the UK now. But when the UK financial problems start hitting us, then that has a snowball effect," he said. "In 2007 or so, Iceland went bankrupt. People said 'what's Iceland?' But it was a snowball. The next thing you know there was a (problem) in the US, and the next thing you know, we were in a terrible financial situation."

Rogers said the global economy is dependent on unprecedented monetary easing from central banks around the world, and he believes the side effects could leave the world reeling.

"I'm very pessimistic about what's going to happen in the world: Asia, Europe, America. The central banks have been printing money for about eight years now at least, interest rates have gone to nothing. This has never happened in world history," Rogers said. "They've actually had all the major central banks, Japan Europe, Britain, America, printing huge amounts of money, driving interest rates to absurd artificial levels. It's going to end. And when it ends, we're going to pay a very serious price."

Asia may be thousands of kilometers away from London and Brussels, but the region is not immune to any repercussions. Rogers expects investors will be dealing with a challenging set of risks in the coming months, and possibly years.