"It's getting worse, not better."

That's how Jim Rogers responds to the recent talk of improvement from President Obama, Treasury Secretary Geithner and Fed Chairman Bernanke, among others.

"Papering over the problem is not going to solve America's problem," Rogers says. "The idea you can solve a problem of too much debt and too much consumption with more consumption and more debt defies belief. I cannot believe that grownups would stand there and say that."

History shows the only way to solve a financial crisis is "when people go bankrupt, you let them go bankrupt," Rogers say. "Then, competent people come in, take over the assets, reorganize and you start over."

But rather than "take the pain and reorganize and start over," as Sweden, South Korea and others have done, Rogers says America is "doing the Japanese model."

Keeping zombie banks alive and bailing out their creditors will only prolong the pain, the famed financier predicts...

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Count famed investor Jim Rogers as an ardent support of Congressman Ron Paul's effort to audit the Fed.

The Fed is "the only institution in the world I know of that doesn't expect to be audited," Rogers says in the accompanying video. "It's incomprehensible to me these people are saying they have no reason to be audited -- they must have done something wrong, must have something to hide."

A longtime critic of Ben Bernanke and his predecessor, Rogers goes a (big) step further than merely auditing the Fed, suggesting we get rid of the central bank altogether.

"We don't need the Fed. The Fed is making our lives miserable," the famed financier says. "The Fed is printing huge amounts of money, which we'll have to pay for sometime. The Fed is borrowing gigantic amounts of money on their balance sheet...the numbers are so staggering that this is going to have ramifications before too much longer."

With an eye on history, Rogers notes...

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In the past 48 hours, Bank of America has finished repaying its TARP debts and, according to CNBC, Citigroup is making plans to do the same.

Bank of America raised over $19 billion last week and Citigroup is seeking to raise a similar amount, according to published reports.

Citi shares were up Thursday in part on anticipation the bank will be able to raise the funds and reach an agreement with Treasury to escape the "harsh" restrictions of its government overlords.

As with Bank of America, the widespread view is that Citigroup wants to exit TARP so it can avoid any onerous restrictions on compensation.

"Obviously they're doing this to be able to retain their talent," says Todd Harrison, CEO of Minyanville.com.

Set aside, for a moment, the questions of what constitutes "excessive" pay and whether it makes sense to pay anything to the same group of people who put the industry, and the global economy, on the precipice of disaster a little more than a year ago.

Instead, consider the state of mind on Wall Street (and in Washington) that very little consideration is seemingly being given to whether the banks are healthy enough and the system stable enough that exiting TARP makes practical sense...

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The Obama Administration is going to extend the TARP program into 2010, Treasury Secretary Tim Geithner told Congress Wednesday. But the focus is going to be on aiding consumers vs. financial institutions, amid a sense the banking system is back on its feet after its near-death experience in 2008.

"We didn't have a [second] Great Depression, we could have. You have to give them a lot of points for averting that," says Harvard professor Kenneth Rogoff, co-author of This Time Is Different.

But that doesn't mean the danger is over.

The system is "a long way from healthy," Rogoff says, noting the banks have only profited this year thanks to various and sundry government programs and the Fed's easy money policies. "If I told you, you could borrow almost 30 times what your house is worth at almost zero percent and lend around to anyone you wanted, I'd bet you'd make money too," he says.

The big reason banks aren't lending aggressively is they're bracing for a lot more write-downs in the years ahead...

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Stocks slumped Tuesday as the dollar renewed its recent rally amid evidence of weakness in the global economy.

Disappointing guidance from 3M and sales results from McDonald’s weighed on blue-chip averages, with the Dow and S&P each losing 1%. The Nasdaq shed 0.8%.

Amid doubts about the economic recovery and a sense the stock market has come “too far, too fast,” many are questioning whether the rally can continue.

But such negativity is precisely why investors should view dips like Tuesdays as opportunities, according to Jeff Saut of Raymond James and Jon Markman, author, money manager and newsletter writer.

“I never thought you could be a contrarian by being long in a bull market but that’s where we find ourselves,” says Markman, who pens the Strategic Advantage and Trader's Advantage newsletters. I‘ve never seen a bull market were there’s so little joy. [investors] are so morose. As if it’s going to fall apart right away.”

Looking ahead to 2010, Markman said the best advice for investors is “just be long,” recommending “risk assets” like emerging markets and the Russell 3000 ETF because it provides exposure to both small- and large-cap stocks.

Saut, who has been writing extensively about the “performance anxiety” facing underperforming fund managers, largely agreed with Markman’s assessment...

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President Obama laid out a framework for more government action to boost hiring Tuesday, featuring tax credits for small businesses, more infrastructure spending and incentives for clean energy initiatives.

But Harvard Professor Ken Rogoff says Obama should have skipped the entire exercise, other than the part about extending the social safety net to unemployed Americans.

"Less is more," Rogoff said in response to a question about what the administration should be doing. "Should there be additional fiscal stimulus? I don't think so."

In This Time Is Different, Rogoff and co-author Carmen Reinhart detail the history of financial crises and their aftermaths. Much higher fiscal deficits are a common feature in these episodes; on average, they found government debts rose by 86% in the three years following a banking crisis.

Rogoff is similarly concerned about the "legacy of debt" the U.S. is facing in the aftermath of the 2008 credit crisis...

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From President Obama on down, Americans are hoping Friday's stronger-than-expected November jobs report marked the beginning of the end of our national unemployment nightmare.

Don't get your hopes up, says Mike "Mish" Shedlock, author of Mish's Global Economic Trend Analysis.

The November report was an "outlier" and "almost looked fabricated," according to Shedlock, an investment advisor at SitkaPacific Capital Management

Looking beyond the November jobs data, Shedlock says the odds of the unemployment rate coming down anytime soon are remote.

Even based on generous assumptions of 150,000 new jobs per month, no double-dip recession and a declining participation rate as Baby Boomers retire, "the best I can do is suggest the unemployment rate will be over 10% all the way through 2015 and never dip below 8% all the way out through the end of 2020," Mish says. (You can see the detailed analysis here on Mish's blog and find a downloadable spreadsheet to make your own assumptions and predictions here.)

As confident as he is about the grim outlook for jobs...

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After a year of record profits on Wall Street and with Bank of America set to repay its TARP funds, there's a growing sense the banking sector has healed, or at least on the road to recovery.

But the Fed says the banking sector is currently sitting on more than $1 trillion of excess reserves, defined as capital above what regulators require. If the sector is really healthy again, shouldn't they be lending more aggressively, to help get the "real economy" moving again?

"It's a good thing banks aren't lending," says Mike Shedlock, author of Mish's Global Economic Trend Analysis. "If they did lend, we'd have more defaults and more bailouts."

With unemployment to remain high and mounting problems in the commercial real estate market, more lending would lead to "more defaults and more bailouts," says Shedlock, an investment advisor at SitkaPacific Capital Management.

Industry veteran Peter Atwater, former Treasurer of Banc One among other titles, agrees the banks are not in a position to lend aggressively...

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Friday's disappointing response to the strong jobs report, and weakness early Monday, has some observers once again calling for the end of the bull market.

It is precisely this kind of skepticism that makes Bernie Schaeffer, chairman of Schaeffer's Investment Research, believe the rally still has further to go.

"The juxtaposition of strong upside price action and continued skepticism and outright bearishness -- that is a very bullish sign," Schaeffer says. "There's a lot of money on the sidelines that has not been committed to the market. People talk their positions. Until they start accepting and getting enthusiastic [about stocks] it's an indication there's more money to power the market higher."

The veteran market watcher says there are four major stages of investor sentiment: despair, disbelief, acceptance and euphoria.

If March was the moment of despair - when bearishness reaches its apex - sentiment is currently in the disbelief stage, Schaeffer says, citing the following:

• The Dumb Money: Through October, equity mutual funds had net outflows of $1.9 billion year to date while bond funds had inflows of about $312 billion, according to the ICI. Furthermore, there's been about $10 billion of inflows into inverse funds that short the market, Schaeffer notes. "It not even that money is not coming off the sidelines - [investors are] betting against the market."
• Magazine Indicators: In 1979, a Business Week cover declared "The Death of Equities", perhaps the most famous contrarian indicator in history. More recently, Time proclaimed "Why it's time to retire the 401(k)" in October, while Newsweek weighed with a "Boom and Gloom" cover story, which basically dismissed the validity of the market's recovery. Such covers in general interest magazines suggests how negativity about the markets permeates popular culture, Schaeffer says.
• Guru Chatter: There's a lot of talk these days about the "New Normal," characterized by high unemployment and sluggish economic growth. That may well prove true but to Schaeffer, it's a mirror image of the "New Economy" chatter circa 2000. Similarly, there's a lot of talk now about the "death of buy and hold." Schaeffer is a market timer but says now probably is a better time for buy and hold-type investing vs. 10 years ago.

Add it all up and sentiment suggests the rally has further to go, Schaeffer says...

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