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There is a lot to say on the consequences of the policies of the regulators and the Federal Reserve from outrageous and irresponsible bailouts of big banks and some big businesses, and we’ll continue to talk about and expose that at American Banking News. But Jim Rogers gets to a very simple core principle of free market capitalism, and that is that allowing businesses and banks to fail has been part of the risk inherent in going into business in the first place, and is a end result of the quality and skill of those running those businesses.

So when the government uses and leverages taxpayers’ dollars to shore up poor management, they’ve interfered in the market in ways that they will never admit to and with results that will be difficult to lay blame at their doorstep as the years go on. They know that, and so continue on their merry way, understanding they may never be held accountable for their actions, nor their actions understood by most.

Jim Rogers and others will have none of that though, and Rogers said recently at the CNBC Wordwide Exchange that he not only wished that Lehman Brothers had failed, but 10 other banks as well. He even adds that the government was thrilled that Lehman Brothers failed because it gave them an excuse to “jump in and support banks.”

Here’s how Rogers sees the current problem and its source:

“The real problem over the past 10-15 years has been that regulators have not let people fail. Had they let people fail we would have solved this problem a long time ago. I don’t know why they’re not in jail.”

When Rogers says this, understand he’s identifying the problem as it is today, not attacking the ultimate root of the problem, which is the Federal Reserve and the need to abolish it. But to wonder why they’re not in jail for their actions is a powerful statement by Rogers as to what their practices have brought about, and the consequences of those actions across a wide sphere of our social makeup.

Rogers has been accurately hitting hard for some time on the foolishness of propping up any business by the government which has obviously been run poorly. He rightly exposed the stupidity of supporting businesses and banks which aren’t able to compete with better run companies, and although dead, are allowed to live, not based on improved practices, but on the infusion of taxpayer money which they think will be offered in endless supply. That’s why Rogers always uses the term “zombie” when referring to businesses and banks this type of artificial life support.

When you follow this line of reasoning and use zombie as a metaphor, think of those monster movies you’ve watch. It’s not natural to have something come back from the dead and walk around the streets feeding off of that which is alive. But that’s exactly what the Federal Reserve and regulators have allowed to happen. And every time they do it, the terribly run banks get bigger and are allowed to continue operating, doing business as usual, knowing every time they’re bailed out it’s one more step toward always being bailed out because they’re “too big to fail.” This is truly monstrous and a waste of assets.

Rogers takes the practices of the Federal Reserve with the blessing of the government and extends them to their logical conclusion, which is zombie banks will end up with zombie capitalism. By that he means the system is being fought from being allowed to cleanse itself and the quality companies emerge even stronger after the bad companies have been removed from the system. He now expects ‘zombie capitalism’ to run rampant over the next 15-20 years, with many large companies that should have been left to die, resuscitated by mortgaging the futures of our children and grandchildren.

In the end, no matter how much money you throw at at problem, if the business and banking practices are wrong, you’re doing nothing but wasting money and extending the problem by not allowing the genious of the free market system to cleanse itself of the impurities of managments that don’t know what they’re doing.

On top of all these problems and the usual unintended consequences, Rogers adds that we’ll enter into either a full currency crisis, or at minimum a semi-crisis, sometime with the next year or so.

It’s as simple as allowing banks and business to fail when others are run better than they are. How hard can that be for the Federal Reserve and regulators to understand?

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