But if we did that now and let the whole system collapse it would be disastrous.
Yes. But the alternative is to continue to print money, putting band-aids on problems and claiming to be able to take care of everything. Eventually people will realise that the game is rotten and they’re not going to play it anymore. The whole system will fall apart.
We might make it through the next bear market, perhaps in 2016, 2017 or 2018, but if we do make it through that one, we won’t survive the one after. The situation will be too bad. The system needs to clean itself out. I’m not saying that it’s nice to cleanse the system. But I say that the alternative is much worse.
If you go back to America in the 1920s they raised interest rates from about nothing to 6% following the first world war and they balanced the budget. If you went riding into Washington today and said interest rates should go to 6% and we’re going to balance the budget this year, you might get elected, but you would probably be assassinated within six months. Nobody would put up with the pain that would cause.
And next time around China wouldn’t be able to bail us out as they have their own debt these days. Most Asian countries were savers for decades, but now they have debt. Even the Germans and the Swiss. When I was a kid there was nothing sounder than the Deutschemark and the Swiss frank. Now politicians in both countries do wretched and horrible things. I go back to my earlier point: there’s going to come a time when people aren’t going to take it anymore. I hope it doesn’t happen until the 2020s, but it may happen before that.
What about Japan then? I’ve heard several times that now is once again the time to invest in Japan. What’s your view?
I bought Japanese shares during the tsunami. I was about to anyway then the tsunami hit and made things fall evenfurther.
In my life I have learned that if you buy during a natural disaster, you’re probably going to be okay. They’re not good, but if you have the courage or foresight to buy, you’ll usually be alright. But I’ve now sold because Abe printed a lot of money, made stocks go up for a while, he destroyed the currency. They said they would print unlimited amounts of money, which was great for the stock market for a while, but it’s not going to save Japan. I love it there, but it’s the largest internal debtor nation in the world, they’re destroying the currency, the birth rate has collapsed, the population is declining for the first time in recorded history. The population is going down and the debt is going up. Can you imagine being a 10 year old in Japan? You should leave! I don’t know where you would go, but you should get out as soon as you can. I sold my Japanese stocks last Summer. I was hoping Abe would do what he said he would do, but he hasn’t. He’s printed lots of money, made stockbrokers happy for a while, made me happy for a while, but not now. And therein lies the problem: who’s going to save us? Russia? I own Russia but they’re not going to save us. Maybe if Mr Putin dies, but I don’t know who would replace him.
So where are you optimistic about?
I just opened an account in Khazakstan today and I see good things happening in Nigeria.
Based on oil and gas?
Well it’s more than just that. Good things are happening. Nigeria has been a disaster – I’ve never owned Nigerian shares in my life. They had an election last year and instead of fixing the election he accepted it and stood down. That’s mind-boggling for any African country, but Nigeria? It’s unheard of! Having been a rotten, horrible and disastrous country for decades, it seems now they are confident people who accept they have to change. I’m still not invested there, but for the first time it’s on my list. I’m 73 years old and never have I thought about investing in Nigeria until now.
Khazakstan is changing. Oil collapsed so it was destroyed but people there seem to understand now how markets work. They let their markets float rather than prop it up.
