Q: Are we looking at a Japanese-style lost economic decade?

Rogers: The Federal Reserve is making the same mistakes that the Japanese made. They’re trying to say: “We won’t let anybody fail. We’ll print a lot of money. We’ll drive interest rates to zero. And we don’t want anybody to fail. We’ll put on as many Band-Aids as we have to.”

Well, putting Band-Aids on a cancer patient is not a good solution.

So whether it’s like the ’90s in Japan, or the ’70s in America, remains to be seen.

[One-time U.S. Federal Reserve Chairman] Arthur Burns, who headed the central bank in the ’70s, did exactly what Bernanke’s doing. He raced in and printed money and said: “Oh, everything’s gonna be OK.”

But the economy never recovered, inflation went through the roof, and the dollar was under duress. Eventually they had to bring in Paul Volcker and interest rates went over 20%. And eventually they killed inflation and they solved the problem.

They’re making exactly the same mistakes that Burns made. For whatever reason, though, this problem is going to last longer than previous difficulties in America. And it’s probably going to be worse.

Because, now, America is a debtor nation. Now we’re the largest debtor nation in the world. At least in the ’70s, we were still a creditor nation. Japan could survive because they were the largest creditor in the world at the time. So they didn’t fall off the face of the earth.

America’s now the largest debtor the world has ever seen. What’s happening in the U.S. is not going to be fun.

Q: Should the Fed be stepping in like it has in recent months?

Rogers: It’s outrageous that Bernanke’s sitting there. You know, I’ve read the Federal Reserve Act. Nowhere does it say [the central bank is] supposed to bail out investment banks! Nowhere does it say you should bail out Wall Street. Their mandate was to have a sound currency, and then it was later expanded to have employment – to help employment. But nowhere does it say: ‘Bail out investment banks.’

Investment banks have been failing for centuries. The world hasn’t come to an end… even when investment banks have failed. They just caused a setback, and so what!

Recessions are usually good for the system. They clean out the excesses. And my God there’ve been excesses on Wall Street in the past 10 years. You don’t see a bunch of 29-year-old cotton farmers driving around in Maseratis and flying in private planes to exotic locations. Well, you see a lot of guys on Wall Street doing that.

And the idea that we’re now supposed to bail them out is ludicrous! I don’t see any of those guys sending their bonus checks back.

Huge amounts were made in the debt markets. We now know [that money was made] at least incorrectly, if not fraudulently, and yet, now we’re supposed to bail them out. It’s bad enough they get to keep their money. But the outrageous part is that it will cost more to try to prevent a recession than to have the recession.

We have safety nets in place, now. We did in the ’70s in America and the Japanese did in the ’90s. I think there’s good evidence that it will cost more to try to prevent the problems than to have the problems.

Q: That’s a very interesting thought that had not occurred to me before.

Rogers: Well, we’ll see if it’s right. In nature, there’s the natural phenomenon of forest fires. The forest fires are pretty terrible when they’re going on. But nature invented them to clean out the forest so that the forest could then come and grow from a new, sound foundation. That’s what recessions do, too. They’re a natural phenomenon.

Nobody likes it when we have them any more than anybody likes a forest fire. But in the end, everybody’s better off. Bernanke thinks he can stop this; he’s going to very well destroy the system by trying to save it.

Q: Could you see a segment of the financial system surviving this? Or do you think that there will be such catastrophic change that we won’t recognize it till several years from now?

Rogers: Ask me again in five years, 10 years. That was true after the ’30s, certainly. It was true even after the ’60s. Very few people went to Wall Street in the ’70s, very few. A whole generation ignored Wall Street in the ’30s and in the ’70s.

Will that happen again? Probably, because of things we’ve been discussing.

So there will be big changes, of course. If you’re in the field that deals with – and works out – bankruptcies, you’ve got a great future – on Wall Street, or in the legal profession. If you’re in commodities, you have a great future. Some sectors of the financial community are going to do well. Many others are going to disappear and/or do badly.

Q: How low could the dollar go?

Rogers: I have no idea. You just have to watch it as it evolves. Politicians and bureaucrats can do unbelievably stupid things, and have [done so] throughout history.

They will usually do things that are so stupid nobody can believe them, but it happens. You have to watch and see as it goes.

[Editor’s Note: This is the first installment of a two-part story based on Investing Director Keith Fitz-Gerald’s interview with investing guru with Jim Rogers. In the second installment, Fitz-Gerald will explore China’s potential, the energy sector and the Middle East, and the global commodities boom. To learn more about an offer that includes a free copy of Rogers’ new bestseller, "A Bull in China," please click here].

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