Rogers Rips Bernanke, Predicts Demise of Fed
Famed investor/world traveler Jim Rogers, interviewed on Resource Investor, drops this bomb on Bernanke:
- RESOURCE INVESTOR: I wonder what Mr. Bernanke's going to be doing. But what it amounts to is the same policy that they've always employed when they get a small so-called crisis; instead of letting the cycle run its natural course, they chuck money at the problem. Do you think he's going to do it again?
JIM ROGERS: Of course he is and it's just going to make it worse, you very astutely pointed out instead of just letting the cycle run its course - the Japanese tried for 15 years to keep propping up, you know, zombie companies, etcetera, etcetera, and it took them 15 years and they're still aren't out of the woods. They should just go ahead - recessions are common. We've been having them every five or six years since the beginning of time. They're good. They clean out the previous excesses. They let the system start over with a sound basis.
I mean, obviously, some people get hurt, but we have a lot of safety nets in place now throughout most of the world so that it's not the end of the world and the amount of money spent trying to prevent a recession in the end costs a whole lot more than just letting the world have its recession then get on with it.
and:
- RESOURCE INVESTOR: Yeah, let's do. But briefly, before we leave the subject, do you think that Bernanke is just going to become another Greenspan?
JIM ROGERS: He's worse. All he knows is to print money. His whole intellectual career has been spent studying the printing of money. America's now given him the printing presses and all he knows to do it to run them. He doesn't know about markets. He doesn't know about foreign currencies. We know now he doesn't even know about economics. I mean, he's got a PhD in economics and he was a professor of economics, but he doesn't have a clue about economics.
I will quote you - I hate to quote you, but one more time - I was watching him testify before congress and I almost fell out of my chair. He said under oath, so we presume he wasn't lying, that he was just a fool, he said if an American only buys American products, it does not matter to him if the value of the U.S. dollar goes down. He will not be affected. I was looking at the man to see if he was lying, giving government propaganda, but then I could see he didn't even really understand.
He didn't understand if, you know, even if say I'm an American, Lindsay, and I only buy American tires. Well if the price of foreign tires goes up, obviously the price of American tires are going to go up too. Plus, if the dollar goes down, the price of rubber's going to go higher, etcetera, etcetera, etcetera.
So the man doesn't even understand economics. He's going to print money. He's going to throw money out the window. The dollar's going to go down further and further and further. Inflation's going to get worse and worse and worse throughout the world - the world, not just America - and we're going to have a worse recession in the end.
- RESOURCE INVESTOR: Yeah, I've been writing an article on Allan Greenspan and his tenure for a local magazine, Jim, and I've been surprised at looking at some of the quotes that have been attributed to Greenspan ever since he took over as Fed Chairman in 1987. I'll just read one to you if I may briefly. It says - he said the following back in 2003, 2004, "Innovation has brought about a multitude of new products such as sub-prime loans and also niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. With these advances in technology, lenders have taken advantage of credit scoring models and other techniques of efficiently extending credit to a broader spectrum of consumers." I mean the more I read about Greenspan, the more I realize he's at the root of our current problems.
JIM ROGERS: Oh no, of course he is. I mean he's laid the foundation for the demise of the Federal Reserve. Between Greenspan and Bernanke, we may see the Federal Reserve fail. We've had three central banks in America. The first two failed. This one's going to fail too. I mean if you really - we could spend a whole program, a whole year of programs, reading quotes from Greenspan and you would realize what a fool he's been.
In my book, "Investment Biker," I wrote that the man was a fool. I've been on TV many times talking about, oh, he just sat and watched CNBC and repeated it and said, "This is the way the world is." He never got it right, Lindsay. What was so astonishing to me was that his PR machine made some people think he was a smart guy. He never got it right in his entire investing career. I could go back over many of his failures too, but let's go on with the program.
Comments (19)
George Gaskell
They clean out the previous excesses.
Rogers's general theme is great, but I can't stand the use of the term "excesses." It has such a Leftist/Progressive ring to it.
"Malinvestment" is a much better term for describing what is going on here -- good-faith errors in economic decision-making. To call these errors "excesses" implies that there is an inherently immoral or unethical quality to them.
The scapegoating that goes on during recessions is counterproductive because it masks the real problem -- that the Fed has made it impossible for investors and other economic actors to KNOW what the true demand and profitability of any given course of action was. As a result, they make errors.
Businesses make small-scale errors every day. They are inevitable due to the fact that we all have imperfect knowledge and can't perfectly predict the future. But when the Fed steps in and inflates the money supply, everyone makes errors, makes more of them than they otherwise would, makes the errors far larger, and worst of all convinces everyone that they haven't actually made errors after all. It prevents us from experiencing the natural, corrective effects of economic reality.
Anyone who has tried to raise a child to adulthood knows that facing the unpleasant consequences of bad decisions is how we learn not to make bad decisions. Preventing businesses from experiencing the losses that come from bad decisions only encourages more bad decisions.
But calling these errors "excesses" implies that bad economic decisions are somehow a kind of vice or moral failing, when in reality they are merely the result of distorted perceptions.
Published: February 1, 2008 9:00 AM
Curt Howland
Of course it's going to fail.
Where's Andrew Jackson when we need him?
Published: February 1, 2008 9:02 AM
Curt Howland
We have to overcome the irrational exuberance for Greenspan.
Published: February 1, 2008 9:04 AM
Some outside Liberterian Circles Gets It.
It is comforting to hear that someone outside Liberterian circles gets the concept. So there is hope.
The Federal Reserve is not going to fail. There is a 6 trillion dollar national debt that must be funded. They can fund it 3 ways:
1. take on more debt.
2. Increase taxes.
3. Steal it through inflation.
The only way now the government has is #3. Because the government AINT GETTING SMALLER!!!!
Published: February 1, 2008 9:53 AM
Brent
U.S. Government debt exceeds $9 Trillion.
Published: February 1, 2008 11:02 AM
Ms. Legz
In one economist newsletter, I read the USG debt was actually over $53 Trillion ~ Glad I know how to garden and can goods! Great article!
Published: February 1, 2008 11:14 AM
eric lansing
NPV of federal obligations less revenues = roughly $70 trillion
http://www.nytimes.com/2006/06/11/magazine/11national.html?ex=1307678400&en=e896995b585827c0&ei=5089&partner=rssyahoo&emc=rss
and re: Bernanke... interesting how he writes about inflation targeting, transpanancy etc, yet at the first sign of a bear market in stocks he forgets about his entire academic career.
Published: February 1, 2008 11:57 AM
Dennis
Does anyone know what the U.S. government debt is relative to the size of the economy, and how this measure compares to those of the major European countries? My impression is that the major European countries are generally carrying heavy relative debt loads also.
Published: February 1, 2008 12:33 PM
David Bratton
They can fund it 3 ways...
You forgot confiscation. I think most of the saved wealth is tied up in retirement accounts. At some point the government will go after those. It'll probably be about the same time Social Security starts to run red ink.
Published: February 1, 2008 1:25 PM
gotok
U.S. Total federal Debt is close to 65% of GDP. Here is the link that shows few comparisons to other countries like Japan or Europe.
http://www.optimist123.com/optimist/2006/06/us_national_deb.html
Published: February 1, 2008 3:25 PM
Mike McD
May I suggest the purchasing of Gold and Silver. Furthermore, I suggest buying from multiple sources in the hopes that the gov cannot track all of them (for reason #4 above, confiscation) See Greenspan report written in 1966 :
http://www.europac.net/greenspan.asp
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Published: February 1, 2008 10:02 PM
Mike McD
May I suggest the purchasing of Gold and Silver. Furthermore, I suggest buying from multiple sources in the hopes that the gov cannot track all of them (for reason #4 above, confiscation) See Greenspan report written in 1966 :
http://www.europac.net/greenspan.asp
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
Published: February 1, 2008 10:03 PM
Robert
Austrian business cycle theory and their notion of malinvestment is mistaken.
Published: February 2, 2008 4:06 AM
marxbites
Been banned from Digg for posting too many Mises articles and articles supporting Ron Paul.
They will NOT even answer a query as to why!!
Search out Ayn Rand pal Greenspam's article vis govt power, freedom and gold.
The one Ron Paul asked him to explain many times.
Joe Kennedy said "Fifty men run America, and that's a high figure"
Read Murray's "Wall Street, Banks & American Foreign Policy" also at Lew Rockwell's.
The CFR/NWO/Banking elites DO run us while raping us all in the process - criminals all, traitors of freedom and war profiteers.
Published: February 3, 2008 4:19 PM
marxbites
WELLLL Robert - that's a fairly bold and impudent statement!!
Care to back it up with a single cogent reason why you could possibly say that?
Have you EVER really read any Rothbard or Mises? Or Hayek?
Or do you just respew the self interested lies of educrats who know who butters their bread?
Published: February 3, 2008 4:23 PM
newson
to robert vienneau:
"Some Capital-Theoretic Fallacies of Austrian Economics"
this critique seems to be subscription only. can you make it available for public scrutiny?
Published: February 3, 2008 7:11 PM
newson
to george gaskell:
far from pedantry, i think your point about "excesses" is right on the money. the left is very adept at using language to further its ideology. libertarians must be equally careful in their wordcraft.
that said, i don't know whether rogers is an austrian, or whether he's just a very cluey investor with street-smarts.
Published: February 3, 2008 10:24 PM
Chris
It's pathetic how long it took Bernanke to lower the rates, he pretty much sent our economy into a recession. We need to have the Fed be more active in preventing a recession, and less concerned about unimportant inflation. I found a petition which is telling this all to Bernanke.
http://petitionearth.com/viewpetition.php?id=66
We need to make a statement, we can't have the Fed destroy our economy.
Published: February 4, 2008 6:47 PM
Farmer Hill
Perhaps Greenspan is a fool, but he once believed in a sound monetary system. If he has really helped to bring down the Fed, he should be considered a hero.
Down with fiat money! I say.
Published: February 4, 2008 9:00 PM