Some countries in Western Europe are bankrupt or are having serious liquidity problems and they should be allowed to restructure their debt, famous investor Jim Rogers told CNBC Tuesday.
On Tuesday, European Union ministers are meeting to discuss ways to solve the debt crisis sweeping through the euro zone, after 16 finance ministers from the euro zone decided Monday to make no new move to solve the crisis.
“You need to let Ireland go bankrupt. They are bankrupt, why should innocent Germans, Poles or anybody pay for mistakes made by Irish politicians,” Rogers said.
Greece is also insolvent, Portugal has a liquidity problem and countries like Belgium, France and even the UK have various problems, he added.
His words echoed some remarks made recently by officials from Germany and even by the European Central Bank governing council member Nout Wellink, who said it was not the ECB’s job to save countries on the brink of bankruptcy.
“This is a serious problem we have in the West, somebody has to deal with it,” Rogers said.
But Rogers, a noted hedge fund pioneer who started the the Quantum Fund with George Soros in 1970, bought the euro when it was low. He said was sticking with his investment.
“I’m long the euro and certainly I’m staying with it.”
Trouble With US Debt?
The US might find itself in the same situation as the euro zone next year if it doesn’t tackle its bulging debt, David Bloom, global head of foreign exchange, told CNBC earlier Tuesday.
“I do know that the US is the largest debtor nation in the world. I don’t like at all what’s happening here,” Rogers said when asked if he had the same concern.
Many analysts say the US will never get into a situation where bond vigilantes will attack its debt, because of the dollar’s position as the world’s reserve currency.
“(The US government) has the ability to issue debt as long as people will take the debt. I know people who say that within 5 years the US will default on its debt,” Rogers said.
“There comes a time when people say ‘I’m not going to lend you any more money,’” he added.
He reiterated his fear that inflation has already started to creep up across the world and that will ultimately affect stock markets.
“Everybody watching this show knows that prices are going up,” Rogers said. “Prices are going up, that’s called inflation and ultimately wages are going up too… anyway that’s not good for stock markets.”
Rogers thinks interest rates are going to have to rise to fight inflation, which will be made worse by the fact that the Federal Reserve has continued to print money.
“A year ago the Fed was talking about how they’re going to be withdrawing the liquidity by the end of 2010. Here we are at the end of 2010 and they’re pumping more liquidity in,” Rogers said.