Commenting on the health of U.S. banks, billionaire investor Jim Rogers said that most large banks in the U.S. are "totally bankrupt," and the attempt to fix them by the government is completely misguided.
Rogers said that the implementation of the $700 billion bailout does nothing to really fix the problem, it only rewards the poorly managed firms and keeps them in business while they should be allowed to fail.
For example, the bailout doesn't do anything to tackle the problem of how banks take care of their balance sheets; one of the key negative behaviors that poorly run banks practice.
All that the government is doing is rewarding the terrible management of these banks with an extended life, when in reality they need to be left to fail so the banks that are run well can either take them over or win their customers.
"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," said Rogers. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."
With America now taking similar steps that led Japan to years of economic stagnation, Rogers also believes that will probably be the economic fate of America as well.
What happened with Japan is they also wouldn't allow their large financial institutions to fail, and now that President-elect Obama is asserting his economic idea is to focus on building up national infrastructure, it'll probably make it worse, as that's also the strategy Japan used to work itself out of a financial crisis they've never recovered from.
I remember Hillary Clinton mocking John McCain for saying at one time that he would do nothing to fix the economy. That is truly the role the government should play, yet that are in a stage of bailout addiction, and they can't keep away from attempting to gain political favor by passing around the taxpayers money.
As Rogers correctly asserts, the current actions will probably end up with America weakening for a long time into the future. All this because politicians can't admit there is nothing to do but ride this problem out.
History has shown that if what is called the Great Depression in America would have been left to itself, it only would have been a very short, temporary pain that would have been taken care of in a relatively short time, as previous recessions had proven.
That's the kind of courage we need today, to have polticians leave it alone and acknowledge they aren't a factor when it comes to the free market. Very few are willing to walk that wise path. The result will be Americans paying for it for years into the future.