Jim Rogers

Why Jim Rogers hates Ben Bernanke

February 13, 2013: 9:33 AM ET

The commodities expert says the Fed is throwing fake money after bad debts, and we're all going to suffer.

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Jim Rogers

FORTUNE -- Jim Rogers does not want you to get the wrong idea. He thinks Ben Bernanke is doing a really, really, really bad job as Federal Reserve Chairman.

In his most recent book, Street Smarts, Rogers says that if you are to look back at Bernanke's predictions over the past few years, you can only come to one conclusion: The Fed Chairman is always wrong. Here's the money, no pun intended, quote:

"He knows little about economics or finance, he has no idea how markets work, and the only thing he truly understands about currency is how to print it."

Rogers, who is a well-known investor and once managed money with George Soros, has showered the hate on Bernanke before. Rogers called the head of the U.S. central bank an idiot all the way back in 2008. But in the new book Rogers fleshes out his beef with Bernanke a bit.

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He says Bernanke has misread the crisis, and that's why the economy is going nowhere fast. Rogers believes the financial crisis was about people and institutions - namely subprime mortgage borrowers and later European governments - not being able to pay their bills. But Bernanke has treated it like a liquidity crisis, flooding the system with cash. The result is an economy that discourages growth, and is mired by the prospect of inflation.

There are a number of arguments to counter that. First of all, while the financial crisis started as a solvency problem - people not being able to pay their bills - it quickly turned into a credit problem. So at that point, flooding the economy with money made sense.

Second, while there are a number of ways the Fed can do it, lowering interest rates and encouraging people to borrow, i.e. liquidity, is really the only thing the Fed can do. So if you are saying that the Fed shouldn't have done that, what you are arguing is that the Fed should have done anything at all in the face of the worst recession in more than 60 years. And I don't know how you can argue that.

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What's more, the only solvency issue that really matters is whether the U.S. is solvent. And you can argue, as people do all the time, that the government is either essentially bankrupt or on the road to it, but that's not really Bernanke's fault. That's the President's and Congress's fault for drawing up and approving the budget. If anything, you could argue that Bernanke has made it harder for Washington to run up deficits by keeping interest rates low and making the U.S. dollar less attractive, which should make it more difficult for the government to borrow.

But that's not happening. A euro cost $1.25 when Bernanke became Fed chairman. Since then the dollar has been up and down from there. Now it's down, but only slightly, to around $1.30.

What makes Rogers' anti-Bernanke argument particularly odd is the fact that it is coming from Rogers. For the past decade or so, Rogers has been a commodity bull, saying that world population growth and a lack of investment in our U.S. agriculture has led to a crop shortage that is pushing up prices and will continue to. So while Rogers says he worries about inflation, he has long acknowledged that the main source of that inflation, at least recently in food prices, isn't coming from Bernanke.

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What you can certainly argue is that we don't have a credit crisis now. Banks have more than enough money to make more loans. The ratio of loans to deposits is at an all-time low. And so Bernanke's bond buying is no longer serving a purpose. But what's the risk in doing it? At a time when there is almost no inflation, why not add all the money to the system you can and see what happens. You can always raise rates later if you have to. And being that the economy is already slow, what's the difference?

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