U.S. Financial Crisis Worsens
The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is “more communist than China right now” but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe.
“America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich . . . it’s just bailing out financial institutions,” Rogers said.
“This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I’m not quite sure why I or anybody else should be paying for this,” Rogers told “Squawk Box Europe.”
“Bank stocks around the world are going through the roof, that’s ‘cause they’ve all been bailed out. You don’t see the homeowners in Kansas going through the roof because they’re not being bailed out,” he added.
On March 12, 2008, Rogers was asked what he would do if he were in Federal Reserve Chairman Ben Bernanke’s shoes. Rogers, who slammed the Fed for pouring liquidity into the system and accepting mortgage-backed securities as guarantees, said: “I would abolish the Federal Reserve and I would resign.”
If this happened, “we don’t have anybody printing money, we don’t have inflation in the land, we don’t have a collapsing U.S. dollar,” he told Squawk Box Europe. “No country in the world has ever succeeded by debasing its currency,” he said. “That’s what this man is trying to do. He’strying to debase the currency as a way to revive America. It has never worked in the long term or the medium term.”
The Fed’s move to accept risky collateral is not part of the central bank’s business, he added.
“What is Bernanke going to do? Get in his helicopter and fly around the world and collect rents? That’s absurd,” Rogers said.
A recession may be a good way to clean up the economy, while trying to prevent one may cost more and actually worsen the recession, Rogers said. Also, investment banks should be allowed to fail.
“Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes—if you bail out every investment bank that gets in trouble, that’s not capitalism, that’s socialism for the rich,” he said.
“This is a big huge mess and neither one of them (McCain or Obama) has a clue what to do next year. It’s going to be a mess.”