US Is "More Communist than China": Jim Rogers

[ocean]

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich... it's just bailing out financial institutions," Rogers said.

Stock markets jumped after the U.S. government's decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.

But Rogers said in the long term the move spelled trouble.

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

European stocks soared on Monday, led by banks. UBS was up 11 percent, BNP Paribas up 8 percent, Credit Agricole up 11.1 percent and HBOS up 13.8 percent.

"You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie (NYSE: fnm) or Freddie (NYSE: fre) ... because they don't have to worry about going bankrupt all of a sudden," Rogers said. (Watch the video on the left for the full interview)

"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.

"A Huge Mess"

However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.

It's rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I'll just sit and watch," he said.

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.



From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.

"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."


http://biz.yahoo.com/cnbc/080908/26603489.html?ref=patrick.net

[Kilgor]

They say the disparity between rich and poor in china is worse than the US.

[Lambert58]

They say the disparity between rich and poor in china is worse than the US.

The disparity between rich and poor in the US is based solely upon effort. In the US, anyone can work their way through college, I'm a shining example: joined the military and used the benefits. After I got out I used student loans where I had to. No hand outs, I had to pay for every dime. I also was smart enough to get degrees in fields where I could get a job.

hint: not history, psychology, english, communications, etc... not that those fields are without merit, but when you gotta make $$ you have to limit your choices and go with what pays. Later, once you've built a financially sound foundation, you can pursue whatever your heart desires... I could go off and get a degree in trout fishing now, having paid everything off, and be guilt free.

Additionally, beyond the benefits I got in the military (which I feel I paid for in blood sweat and tears...) I never asked the american taxpayer to carry me: I paid my own way.


In China, it's not that simple.

[sinophile]

Additionally, beyond the benefits I got in the military (which I feel I paid for in blood sweat and tears...) I never asked the american taxpayer to carry me: I paid my own way. In China, it's not that simple.

Actually it IS that simple. In China 30% growth (now less) and easy lending has made millionaire's out of peasants and the children of peasants; and has created a massive (though per capita small) middle class.

Just one example: employee joins company as a worker and usually with an education. Works and saves a befriends a colleague, or has a spouse working. Shortly, they've scraped together enough money or made the right connection to borrow money (perhaps even hot money from a blackmarket lender). With double-digit growth they're off to the races manufacturing or brokering other's manufactured goods.

China is THE capitalist entrepreneur playground... but only if you're Chinese.

Anyway that party is almost over:

http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html?_r=1&ref=business&oref=slogin

http://www.nakedcapitalism.com/2008/09/chinas-central-bank-is-short-of-capital.html

Very disturbing:


Victor Shih, a specialist in Chinese central banking at Northwestern University, said that when he visited the People’s Bank of China for a series of meetings this summer, he was surprised by how many officials resented the institution’s losses.

He said the officials blamed the United States and believed the controversial assertions set forth in the book “Currency War,” a Chinese best seller published a year ago. The book suggests that the United States deliberately lured China into buying its securities knowing that they would later plunge in value.

[Winger]

The article fails to mention all the brokers that profited on loans before Fannie and Freddie bought them. First came the Lier Loans, where loans were given out without proper verifications of income and finances. These loans were in turn bought by Fannie and Freddie and the consumer payments didn't balloon on the ARM till after they bought them.

The original Lier Loans were sold by a lot of institutions but why would banking institutions take on these loans if they were going to fail? It was the individual mortgage brokers(middle class/upper middle class) working for these banks wanting to make a greedy buck. The larger and quicker the loan, the more and quicker the commission. The banks made money also. And, in most cases sold the loans off to Fannie and Freddie foreseeing the impending doom.

Lack of regulation at the time is the true culprit.

As to this making the government more communist? Well, if they don't bail them out then this could be the impetus to a longer recession or an actual depression. The government has no choice for the good of country and the global economy as a whole.

It would be nice if they hunted down and prosecuted all these execs buying loans at face value and not checking them.

[delio]

One only need to looks at the Shanghai stock market to dismiss this out of hand. In fact what is surprising to me is how little the U.S. government actually owns in the market, even relative to major Western countries like France, Germany and Italy.

The part of communism that the U.S. indeed does more than China is that of subsidizing the less well off. But that is the general rule with developed countries (eg. the United States) vis-a-vis developing countries (eg. China).

[hskywalker]

The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," (http://biz.yahoo.com/cnbc/080908/26603489.html?ref=patrick.net)
They don't have the most toxic ones.They just have too much bad ones.The banks and risk-loving investors hold the worst ones.

[delio]

Here's is my prediction: it the U.S. government is long on Fannie and Fred, it will actually make money out of the deal by the time the two companies come out of conservatorship - and that's without factoring the benefits to the citizenship as a whole (e.g. relatively cheaper mortgage interest rates, etc).

In the short term it may have to put a boat load of money into them. But the 'private equity' firm called the U.S. Treasury has enough capital access and Fred and Fannie are cheap enough that in the mid to long term (three to seven years) the two companies' assets market value should appreciate enough that the government should be able to make a profit out of it, so long as the government ultimately decides to let the market have a larger say in their mission or return them to a similar structure as they were for the last few decades.

[Ordie]

There's nothing wrong with capitalism as long there is regulation. What happened with the sub-prime is that there was no regulation.

Moreover, corporations keeps two sets of books.

One for the shareholders stating they are making record profits to inflate the stocks.
The other for the IRS with every loophole to avoid paying taxes.

The CEO's are rewarded with generous stock options and salaries if they achieve profits. Thus the incentive for 'creative accounting' is great.

Solution: Simple flat tax with no loopholes, one set of books.

BTW: I lost $400 yesterday on my 401K over this crap, while the CEO of Fannie and Freddy got a severance package.

[hskywalker]

The chinese education system is actually quite fair, no matter you are rich or poor, you can work your way through education system to personal prosperity. The rich-poor disparity is more reflected after you got a job,like bad warefare, injustice in legal system...

Maybe I am a bit extreme, but the thing I don't like the education system is they have a low moral standard. You go through the whole education system, you automatically become master of cheating, lying, boot-licking...Well, at least familiar with it. In china, academic corruption is a big problem.

[Power_serj]

It's not communism although some people in this government do want to guide this country a little closer to that. The upper-class keeps this country from going in the sh*thole. They provide jobs (without small buisnesses and corporations there are no jobs), they give us livelyhood (no one eats without food from grocery stores; whether it is corporate or local), they give us gasoline etc....

Although the government should try to stay out of direct meddling in economic affair such as bailing out corporations, there are times when it is needed to keep the economy in tact. The role of the government in the United States should be to regulate buisness not run and shape buisness. In a *Communist governmnet, the government will run and shape buisness, but in a controlled Capitalist government (like the US) the government will allow people to control capital with regulation.

*When I say "Communist government" I'm talking about the de facto Communism that China and the Soviet Union were ruled by, not the philosophical version of Communism of collective ownership.

[Ordie]

The chinese education system is actually quite fair, no matter you are rich or poor, you can work your way through education system to personal prosperity. The rich-poor disparity is more reflected after you got a job,like bad warefare, injustice in legal system...

Maybe I am a bit extreme, but the thing I don't like the education system is they have a low moral standard. You go through the whole education system, you automatically become master of cheating, lying, boot-licking...Well, at least familiar with it. In china, academic corruption is a big problem.

Of all the social institutions, education in China is highly valued and merit based for centuries. It's sad that it has become subject to corruption and graft. I guess there's too much greed over principles.

[Eventine]

Of all the social institutions, education in China is highly valued and merit based for centuries. It's sad that it has become subject to corruption and graft. I guess there's too much greed over principles.

It's always been subject to corruption and graft. The trick is self-regulation via market forces. If companies stopped hiring graduates from Chinese universities because of their low moral standards, Chinese universities will be forced to shape up and operate at higher levels. As far as I know, the top universities in China (Beijing Uni, Qing Hua, etc.) still retain relatively good standards. But cheating has become especially bad now that education is seen as a path to wealth. People I talk to sometimes complain about the lower quality of students coming out of China these days.

[hskywalker]

Of all the social institutions, education in China is highly valued and merit based for centuries. It's sad that it has become subject to corruption and graft. I guess there's too much greed over principles.
The selection process is quite fair. It is during the selection process. Professors using students as cheap labors, test book from elementary schools preaching propaganda which neither teacher nor students believe, useless research projects with the sole goal of cheating funds...These are not special cases, they are common practices.
You get through this process, you are automaticlly used to the idea "don't do what is right, do what benefits".

[Jaegermeister + Red Bull]

http://biz.yahoo.com/cnbc/080908/26603489.html?ref=patrick.net

Err...no.

When China nationalise failing private giants, China will be more capitalist than USA. Not the other way.

At the moment the biggest firms in China are all SOEs...state owned enterprises.

[sreto]

The disparity between rich and poor in the US is based solely upon effort. In the US, anyone can work their way through college, I'm a shining example: joined the military and used the benefits. After I got out I used student loans where I had to. No hand outs, I had to pay for every dime. I also was smart enough to get degrees in fields where I could get a job.

Bull. Just because you might have made it doesn't mean that the kid whose parents have problems with drugs or kids that come from the bottom of the social ladder can make it based upon their effort. You need to check your facts. Kids who are born into the wealthy family get everything that they need in order to succeed in life, kids that arent, dont. So how can you say that its solely based upon effort, when some children are going to be born into squalor while some will get the silver spoon? How is it based upon effort if a rich kid gets the fancy new car from their parents and the poor kid has to work two jobs to support him self through school? Effort my ass, no matter how much some people try to make their life better they will always stay in the lower spectrum of the income scale.

Here is a fun fact about Australia, the US wouldnt be any better.

The wealthiest 20% of households in Australia account for 59% of total
household net worth…They also have an average net worth of $1.4 million
per household In comparison, the poorest 20% of households account for 1% of total household net worth and have an average net worth of $23,000 per household

[matthew.manhorn]

In fact China+Russia are more capitalist than USA (if Obama's in office), Canda (socialist), and the EU (middle class populated socialist countries).

Revolution always contradicts the teachings of Karl Marx. Karl Marx believed that capitalism will gradually transform into socialism without revolutions.

[Knutsen]

A couple of years ago, in this same forum me and some european members were called stalinist because we believe in gun control and free public healthcare.
Now, in 2008, the US government national..., sorry, "deprivatizes" (nationalizations are only done in banana republics like Bolivia or Venezuela) two huge corporations.

You might call it whatever you want, you can always compare the situation with a random country which will still be worse but you should better open your eyes to what your government is doing to you, which is higly hypocritical and morally low (to say the least).
It must suck to be an american taxpayer. YOu can't get a decent healthcare and a decent public education but your money will always be there to rescue some guys who played with the money and future of millions of families at a huge interest rate.

Congratulations for such a lesson.

[KilRemgor]

To put it simply, market self-regulation is great at resolving short-term issues or any issues that can be resolved relatively painlessly, but generally fails at solving long-term, painful-to-resolve issues.

Consider ecology as an example. If there were no govt. regulations, everybody would be using the most effective production methods no matter how dirty they are, since using less dirty but less effective method means losing the competition.

If there is certain large, long-term flaw or problem in market system, market self-regulations can't solve it. All they can do is to share the problem between market sectors (via banking, etc. systems) and make a slower yet global crisis out of rapid but local one.

Goverment control is necessary to make 'painful' decisions that market itself has no means to enforce, sacrificing immediate effects for long-term benefits. That happened during Great Depression and in many other examples, but was relatively limited in the past.

With globalization of world economy, fuel crisis, food prices growing, global financial crisis and many more problems, market regulations have exceeded their original problem-solving range and are now failing to solve the bunch of modern issues, resulting in economical negative feedback.

Whether this ultimately leads to socialism (or at least something more socialistic than capitalistic) is open for debate.

Good thing to remember is, everything has it range of applicability.
Free market was great at running relatively closed, separate economies of countries during 20's century better than communistic one. Is it capable of 'running' the whole world's global, integrated economy consisting of highly economically different countries and complex distribution of natural resources? So far it seems no. At least not in the present situation. If something would've changed, like energy becoming free, some space colonies getting created, all states uniting, or whatever, it could become appropriate solution again. But currently free market is failing to manage this resource-starving, unequal towards its parts, overpopulated, military-spending, that much different world.

[Createdeemcee]

You might call it whatever you want, you can always compare the situation with a random country which will still be worse but you should better open your eyes to what your government is doing to you, which is higly hypocritical and morally low (to say the least).
It must suck to be an american taxpayer. YOu can't get a decent healthcare and a decent public education but your money will always be there to rescue some guys who played with the money and future of millions of families at a huge interest rate.



Exactly, I pray Most of America sees it as that to try to make it a better future.

[Lee]

U.S. is a strange combination of capitalistic economy and communist socially. One might think that it could be a good combination and it has it bright spots. I'm not a communist though.

[Laworkerbee]

It must suck to be an american taxpayer. YOu can't get a decent healthcare and a decent public education but your money will always be there to rescue some guys who played with the money and future of millions of families at a huge interest rate.

Congratulations for such a lesson.

I have great health care and received a very good public education but please continue to generalize my entire country as if you know it like the back of your hand.

This bail out has so much more to do with than just "rescuing some guys", it effects the entire world economic system.

But then again I'm sure you know that from your splendid education you received :roll:

[Cedan]

In fact China+Russia are more capitalist than USA (if Obama's in office), Canda (socialist), and the EU (middle class populated socialist countries).

Revolution always contradicts the teachings of Karl Marx. Karl Marx believed that capitalism will gradually transform into socialism without revolutions.

You obviously haven't read much of Marx have you?

[Winger]

A couple of years ago, in this same forum me and some european members were called stalinist because we believe in gun control and free public healthcare.
Now, in 2008, the US government national..., sorry, "deprivatizes" (nationalizations are only done in banana republics like Bolivia or Venezuela) two huge corporations.

You might call it whatever you want, you can always compare the situation with a random country which will still be worse but you should better open your eyes to what your government is doing to you, which is higly hypocritical and morally low (to say the least).
It must suck to be an american taxpayer. YOu can't get a decent healthcare and a decent public education but your money will always be there to rescue some guys who played with the money and future of millions of families at a huge interest rate.

Congratulations for such a lesson.

Whether you like it or not, your economy is dependent on it. Look up the word "conservatorship". This is not a permanent takeover.

[BlackFlag]

communist? no. Feudalistic? sounds more applicable

[chino65]

In China, there are many rags to riches stories. Truly a land of opportunity.

Of course, the poor gets screwed - badly.

But zat's life.:-(

[Limeyfellow]

The disparity between rich and poor in the US is based solely upon effort. In the US, anyone can work their way through college, I'm a shining example: joined the military and used the benefits. After I got out I used student loans where I had to. No hand outs, I had to pay for every dime. I also was smart enough to get degrees in fields where I could get a job.

Sounds like you saved thousands of dollars at taxpayers expense, since if you had to pay everything for their actual value, you would have paid considerably more money, but the set up by the government for cheaper education saved you on alot more expenses due to their free handouts to cover a large part of your costs.

hint: not history, psychology, english, communications, etc... not that those fields are without merit, but when you gotta make $$ you have to limit your choices and go with what pays. Later, once you've built a financially sound foundation, you can pursue whatever your heart desires... I could go off and get a degree in trout fishing now, having paid everything off, and be guilt free.

Additionally, beyond the benefits I got in the military (which I feel I paid for in blood sweat and tears...) I never asked the american taxpayer to carry me: I paid my own way.


In China, it's not that simple.

Well apart from the fact the government discounts colleges with billions of dollars so you didn't have to pay a fraction of the real cost of going there. The taxpayer did. Then when you needed money you were guaranteed a low percentage loan backed up by the federal government and state government with more taxpayers money that could been used for more efficiently. Then you got benefits just because you signed on to do a job in the military, free highschool education, free child healthcare and pay a fraction of the normal cost for electricity, water, gas, trade goods, infrastructure such as roads you use everyday, if you ever had to ask the police to help you, firemen, been on a plane, the food that you eat, the air that you breath and just about every other aspect of your life has been effected by taxpayers money. You have had hundreds of thousands, if not millions of dollars of taxpayers money invested in you.

Sure you never asked the American taxpayer to carry you, but like everyone else in the country including me, the US taxpayers have been very good to you and to say they never done anything to help you is complete bs. This country would fall apart pretty quickly if it wasn't for these programs that have been setup. I am personally rather grateful for it and more than happy to pay my tax share into the system for all I gotten out of it and will receive for my whole life.