Sobering interview with Jim Rodgers over at CNBC.com. An excerpt:
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.
“We had the worst excesses we had in credit markets in world history. We’re going to have to take some pain,” Rogers said.
“Many people bought 4-5 houses with no money down and no job… you think we’ll just say well, that’s too bad, we’ll start over and nobody loses their job? Be realistic.”
People should not look to the upcoming G7 meeting with the hope that the leaders of the strongest economies will find a solution.
“What they (G7 leaders) need to do is go down the bar and leave the rest of us alone,” Rogers said.