Investor Jim Rogers predicts lost decade to USA

Jim Rogers, a renowned global investor, criticizes the plans to support bankrupt banks and described the events happening currently in Washington and New York as an ill omen for not only the USA alone, but for the whole world. One should clean the financial system, and not look for any ways of how to support it further, the specialist said in a recent interview with Handelsblatt.

Photo: Investor Jim Rogers predicts lost decade to USA

If issuing banks and finance ministers are exhausted after the collection of the huge emergency package, the markets will face even bigger problems next year, Rogers believes.

The investor said that it could be a good opportunity to let all investment banks, which were previously well-managed but had no respect to banking business principles, go bankrupt. Those banks had the whole world involved in the current crisis, Rogers said.

It will take America a lot of time to overcome the consequences of the crisis, the expert added. Jim Rogers compared the current state of affairs with Japan of the 1980s – this time period is known in the history of Japan as “the lost decade.”

Russia and South Korea had a different reaction to the crises of the 1990s and let ill companies go bankrupt, which cleared the markets and helped the economies of the two countries recover completely and grow.

Jim Rogers also said that he had enlarged the number of his shares on the Chinese market because the Chinese economy would be growing during the upcoming years.

lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion plan to restore order to the financial industry.

The biggest question is how many will perish and how they will be put out of their misery _ in outright closures by regulators scrambling to preserve the dwindling deposit insurance fund or in fire sales made under government pressure.

Enfeebled by huge losses on risky home loans, the banking industry is now on the shakiest ground since the early 1990s, when more than 800 federally insured institutions failed in a three-year period. That was during the clean-up phase of a decade-long savings-and-loan meltdown that wound up costing U.S. taxpayers $170 billion to $205 billion, after adjusting for inflation.

The government's commitment to spend up to $700 billion buying bad debts from ailing banks is likely to save some institutions that would have otherwise died, but analysts doubt it will be enough to avert a major shakeout.

"It will help, but it's not going to be the saving grace" because a lot of banks are holding construction loans and other types of deteriorating assets that the government won't take off their books, predicted Stanford Financial analyst Jaret Seiberg. He expects more than 100 banks nationwide to fail next year.

The darkening clouds already have some depositors pondering a question that always seems to crop up in financial panics despite deposit insurance: Could it possibly make more sense to stash cash in a mattress than in a bank account?

"It sounds like a joke," said business owner Mauricoa Quintero as he recently paused outside a Wachovia Bank branch in Miami. "But it sounds safer than the turmoil out there right now."

Not as many banks are likely to fail as in the S&L crisis, largely because there are about 8,000 fewer today than there were in 1988, the AP reports.

But that doesn't necessarily mean the problems won't be as costly or as unnerving; banks are much larger than they were 20 years ago, thanks to laws passed in the 1990s.