Jim Rogers poured cold water on Friday's stock rally after European leaders agreed to backstop more debt-stricken banks. The S&P 500 jumped 2.49% on Friday, and spot gold was up $30 to close at $1,599.10/oz.
"This is more than just a temporary stop gap to make the markets feel good for a few hours, few days, or a few week. Then everybody is going to wake up and realize this doesn't solve the problem," the legendary commodity investor told CNBC on Friday.
"This is not solving the problem. This is making the problem worse."
Rogers believes the only real solution to the world's economic woes is to reduce debt dramatically and start letting companies go bankrupt.
"People need to stop spending money they don't have. This is not going to be solved until people stop spending money, stop spending money dramatically and paying down debt. The solution to too much debt is not more debt. All this little agreement does is let them have a little more debt for a little while longer."
On Friday the EU announced a Troubled Country Relief Program, a fund similar to the one set up in the aftermath of the US sub-prime crisis, "to break the vicious circle between banks and sovereigns,” in the words of European Council President Herman Van Rompuy.
Rogers says the announcement and the market rally should be ignored since this cycle has been repeated over and over.
"They have had 20 meetings—20 summits in the last three weeks. And everytime they have a summit and they announce something, the markets rally. And then the markets say, wait a minute. After they read it and see what it really means, then the markets go back down. The same thing is going to happen again."
"Gold is going up because they are going to print more money. I mean where is the money going to come from to solve these problems. It just means we have a license now to print more money. You see commodities are going through the roof right now, much more than stocks."
Rogers say Chancellor Angela Merkel and President Barak Obama are doing everything they can to get through the next election.
"It is going to be bad after the election," says Rogers.
Asked if he is buying or shorting, Rogers said neither.
"I'm just watching. Let's see what goes up the most and what goes down the most, and then I might do something."
Image from Reuters TV interview