Stock markets around the world soared Friday in reaction to the morning's Eurozone debt crisis deal, but noted investor Jim Rogers wasn't impressed.
"This is no more than just another temporary stopgap to make the market feel good for a few hours, days or even weeks," Rogers, Chairman of Rogers Holdings, told CNBC. "Then everybody's going to wake up and say, "This doesn't solve the problem.'"
Meeting in Brussels, European leaders announced a plan early Friday that would provide struggling banks with money directly from the bloc's bailout fund.
The leaders also said bailout funds could be used to stabilize European bond markets. But they did not tie such use to additional austerity measures, which have angered citizens in debt-troubled nations like Greece and Spain.
The summit is just the latest in a series of high-level attempts to resolve the 2-year-old Eurozone debt crisis, which has required bailouts of Greece, Portugal, Ireland, and most recently the Spanish banking system.
Markets around the world surged on the announcement, with some European indexes rising as much as 4%. In the United States, the Dow Jones Industrial Average shot up 200 points at the open. The Standard & Poor's 500 Index was up about 25 points, or just under 2%.
Don't get used to it, Rogers said.
"They've had 20 summits in the past three years. And every time they have a summit and they announce something, the markets rally," Rogers said. "After they read it and see what it really means, then the markets go back down. The same thing is going to happen again."
Rogers noted that commodities markets generally were up even more than stocks in anticipation of a new flood of money. Gold was up about 3% and oil almost 6%.
"That's one reason gold is going up. Because in the end they're going to print more money," Rogers said. "Commodities are going through the roof right now."
Despite all the market action, Rogers is content to remain on the sidelines – for now.
"I'm not doing anything. I'm watching," Rogers said. "I'll see what goes up the most and what goes down the most and then I might do something."
Rogers said his beef with the latest attempt to tackle the Eurozone debt crisis is that it not only solves nothing — it makes the problem worse.
"The solution to too much debt is not more debt," Rogers said. "All this little agreement does is give [the banks] a chance to have even more debt for a little while longer."
To Rogers, the answer to the European debt crisis, and for that matter the huge U.S. national debt, is simple.
"What needs to happen is that people need to stop spending money they don't have," Rogers said. "This is not going to be solved until people start cutting spending – cutting spending dramatically – and paying down debt."
Rogers added that "one thing that would make me very excited would be if a few [big banks] went bankrupt."
Responding to a question that such an event could result in "financial Armageddon," Rogers warned that we're headed there anyway.
"There's going to come a time when the rest of the world is not going to give these people any more money," he said. "then you have much worse Armageddon."
Rogers went on to paint a bleak scenario:
"What are you going to do in two years or three years or four years when the market suddenly says, "No more money'? And the Germans don't have any more money. And American debt has gone through the roof. Who's going to come to the rescue then?"
Related Articles and News:
- Money Morning:
The Eurozone Crisis is Far From Over - Money Morning:
Eurozone Descends into a Farce as "Grexit" Looms Large - Money Morning:
Jim Rogers: "The Fed is Lying to Us" - Money Morning:
Jim Rogers Says New Greece Deal Can't Save Europe - Money Morning:
Eurozone Debt Crisis Gets More Costly with Spain's Latest Move - Associated Press:
Stocks rally as Europe unveils crisis plans - CNBC:
With Crucial Details Missing, Will EU Deal Euphoria Last?
GLOBAL DEPRESSION IN 2016 ?
What are you going to do in 2-4 years when the world says we won't buy any more of your debt? Well, the music stops when heavily indebted sovereigns can not roll over their debt instruments. If you are holding any such debt then a whole bunch more agency debt downgrades won't make you better off. Quite the contrary, you will have less money (capital). This is the ugly head global deflation.
Face value of debt becomes near worthless and as you say, nobody has any more money for rescues, or anything else. Then you see failures of U.S. BANKS and European banks, as well. Destruction of capital will probably drop most commodity prices like an elevator with a snapped cable. No more money, no more demand. If gold rockets to the stratosphere, then I expect the Federal Government to confiscate it from private owners at a fixed (lower) exchange rate and reissue at a higher exchange rate, just like Hitler did in Germany.
I don't know if we have ever in the history of the world seen half of all countries broke, destitute and collapsing all at once. Better hope you are not living in one of them when the music stops.
Folks should listen to Jim Rodgers.