Just about everyone these days is following the decline of the ill-fated U.S. dollar, including famed contrarian investor Jim Rogers, who believes that recent pessimism over the buck will lead, counter-intuitively, to a short-term dollar rally.

Rogers, chairman of Rogers Holdings, says he has no idea when it will happen but he has increased his dollar holdings over the past few months just in case.

“If the rally doesn’t come, and the dollar just keeps going down, then I’ll just have to panic and dump like everybody else,” Rogers told Moneynews.com in an exclusive interview at his home in South Florida. The investing guru recently published his fifth and latest book, “A Gift to My Children: A Father's Lessons for Life and Investing.”

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“I would expect a rally, whether it lasts a quarter or a year, I have no idea. I just hope I’m smart enough to sell it some time, if it happens.”

The Dollar Index last peaked near 90 points when stocks hit their lows earlier this year, in March, and investors worldwide piled into the greenback for protection.

Click to see the interview now on Newsmax.tv

It has steadily declined since, hitting what appears to be a solid bottom around 75 points at the beginning of this month, then trading up to 77 points now.

That apparent bottom for the dollar corresponds roughly to the erratic movement in stocks and a slide downward for gold after both had posted steady gains through November.

The relationship lends credence to the idea that stocks and commodities lately have been a play against a weaker dollar — and the notion that a strong dollar rebound could cut into gains by either or both assets.

In a wide-ranging discussion, Rogers said he nevertheless expects paper money to collapse because too many countries, especially the United States, are printing far too much of it.

“It’s never happened in world history that nearly everybody is printing money at the same time,” he says.

At the same time, countries with strong economies will continue to attract more and more money.

Inflation is another of Rogers’ serious concerns.

“We have inflation now, but the government lies to us about it,” he says.

“Everybody who’s watching this knows that prices have been going up, and they’re going to continue going up and they’re going to get worse... because they keep printing money.”

Meanwhile, despite a recent price drop, Rogers expects gold to go to $2,000 an ounce over the next decade or so.

Short-term, though, a decline is due for gold, he says.

“Gold’s been going straight up for the last few months, and when anything goes straight up for a while it needs to have a correction,” he notes.

“If it goes down more, Lord, I hope I’m smart enough to buy it.”

Rogers, who has made fortunes in commodities as a trader, believes commodity prices in general will continue to rise, even if demand drops, since supply could drop faster still — which happened in the 1970s.

“If the world economy gets better, they’re going to go higher. And if the world economy doesn’t get better, commodities prices will still do well because they’re printing so much money,” he says.

“And by the way, if the world economy doesn’t get better, they’re going to print a lot more money. So I own commodities,” Roger says.

Those parts of America’s economy that have received the most government stimulus money are doing better, but unemployment is still very high and Rogers foresees more bankruptcies.

“What worries me the most is when, in 2010 or 2011, things start getting bad again, they’ve shot all their bullets,” Rogers says. “I mean there’s not much ammunition left.”

Even if the Obama administration succeeds in papering over problems for a while, “what happens when the next problem arises?” Rogers asks. “And I assure you we will have another problem. They always have, and they always will.”

“I know things are going to get worse somewhere along the line because there’s never been unbroken prosperity throughout history.”

Rogers anticipates problems in the world economy by 2011, 2012, maybe even by the end of 2010, probably caused by turmoil in currency markets.

“Some currencies will start going down a great deal, and anybody who owns those currencies is going to be in economic trouble, and it’s going to have a snowball effect,” he says.

As for investing in a recession, Rogers says invest only in what you understand.

“Everybody knows a lot about something,” he observes, so find good investments in your own area of expertise. “Find things in your area of expertise, and then find investments... That’s how you’re going to get rich.”

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