Thursday, October 16, 2008

The Coming Inflation Holocaust?

Jim Rogers:

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.

Read the whole thing.

(HT Glenn Reynolds)

1 comment:

thinking said...

Rogers is way too hyperbolic here.

His use of this term "inflation holocaust" is way overboard.

And his callous way of disregarding the pain of these people who will "hit bottom" is rather Hooveresque.

Sure, in capitalism, there is a Darwinian element, an element of creative destruction, but allowing a huge financial collapse is not a good idea.

Suppose the govt had allowed AIG to fail, along with Merryl Lynch, Washington Mutual, and Wachovia.

We'd surely be at a far worse point than we are now.

Some types of failure are so huge, so catastrophic, that if allowed to happen, would cripple the markets for years to come.

Then there's the political fallout. It seems some economic commentators never want to consider that. If you allowed such a massive collapse, what would happen? You very well may have so many people in pain, that there may be a reaction against the entire capitalist system itself.

Finally, there's a psychological component. If you allow such a massive collapse, the loss of confidence in the system by the masses would last an entire generation.

So it's always interesting to hear from people who just want to allow other people to lose so big. I bet that Mr Rogers, if people followed his advice, would not have nearly so much at stake, and thus can offer his advice in his own self comfort.