Jim Rogers Shorting JPM, IBM

JIM ROGERS: Well Mr. Geithner, has been bombing for 15 years he has caused this problem. Mr. Geithner has been head of the New York Fed for several years and that the office that was supposed to supervise Wall Street and the financial system. He came up with the TARP and all this absurd bailouts. Mr. Geithner has never known what he is doing and everybody will discover that, including Mr. Obama.

What should we do, how do you value this toxic assets?

JIM ROGERS: We should do what US told Japan to do in the nineties. You let companies go bankrupt, you clean out the system, you wipe out everybody that is insolvent. Mr. Greenspan went to Japan and said, “you are doing it wrong”, you have got to let people go bankrupt, you have got to clean out the system. The Japanese did not do it., they continued to prop up zombie banks and zombie companies and they still talk about the lost decade. Geithner said the other day that the Japanese didi not spend enough money, all they did was to spend money. I almost fell out of my chair when I heard that. America is making exactly the same mistakes, and the politicians are making worse, not better. Do you know why they are making it worse? Because they want to support their friends on Wall Street and the bankers so that they all can keep their Maseratis.

But there is no Bad Bank. What are your thoughts on that?

JIM ROGERS: What do you mean no bad bank? They are not letting anyone fail. But the idea that the US Government is coming in and buying this toxic assets, who is going to value these assets, either the banks are and they are going to set it to high, the taxpayers atre going to lose out…it not going to work, it has never worked.

But does the Geithner plan consider some banks may fail?

JIM ROGERS: Who? Who is he going to let fail?

The smaller banks.

JIM ROGERS: They put in 350 billion dollar in last year and the banks paid their bonuses with them. You don`t fail when you pay dividens and bonuses with government money.

Bill Gross said that if we don`t put more government funding to solve this crisis we are going to have a second round of financial crisis in the next 6 to 12 months and even a mini depression. What is your comment on that?

JIM ROGERS: If we put more more government money we will have a depression. This has never worked. Look at countries that took their pain, it was horrible for 1 or 2 years. But they cleaned the system and came out with sound economies. Korea, Mexico, Russia took the pain but cleaned the system and became sound economies, grew fast in the next few years. This is what has worked and what has never worked in the past.

How are you making money right now?

JIM ROGERS: I sold us government bonds, but I had to cover because of Bernanke. I had covered my shorts in last October and I am shorting stocks again. These guys don`t know ahat they are doing. General Electric, IBM, JP Morgan, the same old companies.

Watch Jim Rogers latest interview at Bloomberg TV live from Singapore, February 11, 2009.