A few days back, Jim Rogers (co-founder of Quantum Fund) declared on CNBC Europe that we should be shorting all investment banks and that Fed policy of providing 'liquidity' is failing America. Today, his prediction looks like nothing short of divination. Link to the original video and article below.
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Very interesting read - thanks for posting.
The Fed is only going to make the situation worse when they cut rates at the next meeting. Recessions are part of the business cycle. Let capitalism run its course. Let the people who made risky bets and lost get burned.
I completely agree. The Fed is playing with fire right now by mass-printing US dollars. Bank failures are bad, but 70s type inflation is far worse in the long run.
Now to set up an account so I can long agriculture futures and short some US currency.
Just after I was ripping on the UK for bailing out / nationalizing Northern Rock, the US goes bails out Bear Stearns. Completely agre w/ rogers...why not let one or two of these banks go under? Stop making the American people pay for bankers mistakes. Yes, you might be providing ST liquidity to the markets, but the American public is going to be paying for it over hte next 10-30 years.
i'm not saying i disagree necessarily, but to offer an alternate perspective: the reason that bernanke keeps trying to bail them out is not just because its a recession. it's more because theyre banks--he's one of the foremost authorities on the great depression, and one of the most most important studies in economics (friedman/schwarz) of the 20th century argued that the reason the Great Depression was not just an ordinary recession is that in 1931-33: 1. there were large numbers of bank failures, and 2. the fed didn't provide liquidity and cut rates. this resulted in deflation etc.
obviously, we're not currently at risk of deflation, but if there are bank failures and credit continues to freeze up further, the recession could become a whole lot worse...this is what bernanke's trying to prevent, and why he'll basically cut rates as long as he think he can do it without spiking inflation.
is this right? im not sure. but the fed and bernanke aren't as dumb as you guys think.
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