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"The way to solve this problem is to let people go bankrupt." (http://www.cnbc.com//id/27097823)

http://www.cleanmpg.com/photos/data/501/NYSE_Trading_Floor.jpgCNBC.com - October 10, 2008

This is the real solution, not for the Fed to keep bailing out Wall Street elites on Joe Sixpack's dime... - Ed.

Markets do not trust the governments' plans to keep struggling banks alive and investors will only calm down when the companies with bad assets are allowed to go bankrupt, legendary investor Jim Rogers, CEO of Rogers Holdings, told CNBC on Friday.

"The way to solve this problem is to let people go bankrupt," Rogers said.

"Then you will hit bottom and then you start over. The people who are sound will take over the assets from the people who aren't sound and we will start over. This is the way the world has worked for a few thousand years."

The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems, Rogers warned.

"We're setting the stage for when we come out of this of a massive inflation holocaust," he said.

And the plans are unlikely to fend off a severe economic downturn, as the crisis starts affecting all walks of life…http://www.cnbc.com//id/27097823

Wasn't that Herbert Hoover's plan?

This guy sounds like a vulture who is disappointed in the lack of corpses...

"Then you will hit bottom and then you start over. The people who are sound will take over the assets from the people who aren't sound and we will start over. "

Not that I'm saying that the casino of stock market capitalism doesn't need to have losing bettors shown the door, but you need to study up on the 1920's and 30's (i.e. the Great Depression and the rise of Fascism) before you take this guy's advice seriously.

Here comes some boring economics stuff for you: Part of the current problem is that banks are hoarding cash (increasing reserves) which reduces the money supply in a manner similar to increasing the reserve requirement (http://en.wikipedia.org/wiki/Money_creation). I think the main concern is that we will have a deflationary episode similar to Japan's in the 90's (http://www.nowandfutures.com/download/Deflationary_Lessons__TIE_W06_Posen.pdf) but worldwide and more severe. Mainstream thinking appears to be that central banks would be able to handle inflationary pressures on the backside of the crisis by, for instance, modifying banking reserve requirements.

IMO the main drawback is that large scale issuance of government debt would likely limit the fiscal options of future governments--that is large tax cuts and new spending programs become less feasible.

Here comes some boring economics stuff for you: Part of the current problem is that banks are hoarding cash (increasing reserves) which reduces the money supply in a manner similar to increasing the reserve requirement (http://en.wikipedia.org/wiki/Money_creation). I think the main concern is that we will have a deflationary episode similar to Japan's in the 90's (http://www.nowandfutures.com/download/Deflationary_Lessons__TIE_W06_Posen.pdf) but worldwide and more severe. Mainstream thinking appears to be that central banks would be able to handle inflationary pressures on the backside of the crisis by, for instance, modifying banking reserve requirements.


Amen.

"We are facing a Fire Holocaust" - Noah in the Ark

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life."

- Treas. Sec. Mellon during the Great Depression

http://econ161.berkeley.edu/TCEH/Slouch_Crash14.html

Since 1933 Central Banks from Tokyo to Berlin have employed the Keynesian monetary consensus of "leaning against the wind" to precisely avoid what Mellon and Rogers (who is a great investor no doubt) want. The result has been 70 years of overwhelmingly moderate recessions (with downturns around 1% of GDP on average) combined with a solid record of price stability (with inflation rates below 5% on average).

Given the choice between Mellon and those who followed him, I'll go with the latter every time.

The risk of higher inflation now versus 1960, 1969, 1973-74, 1981-82, 1991, 2001 is indeed higher. That's because our historically high levels of private & public debt due to lax borrowing regulation and tax cuts / spending increases are themselves inflationary all things equal........making the Fed's job of easing the downturn while maintaining price stability that much more difficult.

And governments really hate mass hordes of people with no jobs and no hope. Its in times like that that things like the guillotine are invented and put to use.

Hi All:

___I have been fan of Jimmy Rogers since his stint on CNBC over two decades ago and you don’t want to bet against this guy as he will own you, your house and your job. He is probably the straightest shooter out there other than Buffett and even Buffett coats things to make them smell pretty as of late. Think of a smaller Soros but with ties to America in hoping it will succeed even if he rarely invests in our roulette wheel and crap game.

___About his thoughts. This was not a housing crisis, it was a credit crisis that started last July (July of 07) when foreigners discovered these packaged CMO’s, MBS’, swaps and other derivatives were worth a lot less than they appeared to be. In that month, 750 Billion of foreign investment was reduced to $250 Billion and the house of cards begun to fall apart leading us to where we are today.

___If anyone does not believe the addition of a few $Trillion $’s into the Money supply will not be inflationary later on, they may as well place their money under the mattress as it will add padding but not much financial well-being looking out 5 + years. The Fed and Treasury Secretary are pulling out tools that a month ago they would have been laughed out of Washington to even consider and still the credit markets are locked up. Overnight Libor hit a new high last night or the night before IIRC.

___Back in the 87 crash, there was talk of the Federal Reserve purchasing the S&P very quietly but directly through large institutions and I have no doubt they are doing the same even today as the DJIA is literally collapsing. 29 to 32 saw a 90% collapse in the DJIA. We are half way there and although I am seeing plenty of attractive vehicles out there, trying to catch a falling knife can be dangerous at best and deadly at worst. A contrarian may make a ton but what if it takes a year or two to take out another 30 + %. That is going to be a painful 30% just as the previous 40% hair cut from the highs last fall were.

___About not panicking… Those in the WTC's that panicked and got the hell out lived. Those that followed the course of stay where you are and we will get to you are not longer with us. I am not saying I believe we will see that kind of outcome but in many cases, Jimmy Rogers is right. Bankruptcy for those that purchased a home in the last 4 years and whose job disappeared is all but a foregone conclusion. Trying to bail out a purchaser of an asset that went south is not a healthy solution by any market mechanism let alone the real money is going to the banks that pushed and purchased these risky investments in the first place.

___Debt interest, SS, Medicare and Tax expenditures are heading toward the point of tax revenues and with the latest down turn, that day of reckoning is not now 15 + years out but may 5 to 10 years out. When that happens, no FAA, no Homeland Security, no Department of Defense, no Government subsidies for University research and so on. We will find religion and find it fast or the country will stop working and right now. The country is not working even with $Trillions of treasury and Federal dollars being both borrowed and printed in the last few months. Who is to say we are all to big to fail?

___Rant Mode Off… Have a nice day :)

___Good Luck

___Wayne

Sigh.... Remember the day when all we did was complain about people driving their FSPs and tailgating us to move faster? Gentlemen and ladies, our lives just became a bit more complicated.