After experiencing a few emerging-market crises, I get the sense of watching the same movie over and over. All too often, a tragic part of that movie is the failure of the countries’ policymakers to hear the loud cries of canaries in the coal mine. Before running up further outsized budget deficits, should we not heed the markets that now see a 10 percent probability that the U.S. government will default on its sovereign debt in the next five years? And should we not be paying close attention to the Chinese central bank governor’s musings that he does not feel comfortable with the $1 trillion of U.S. government debt that the Chinese central bank already owns, let alone adding to those holdings?
In the twilight of my career, when I am hopefully wiser than before, I have come to regret how the IMF and the U.S. Treasury all too often lectured leaders in emerging markets on how to “get their house in order” — without the slightest thought that the United States might fare no better when facing a major economic crisis. Now, I fear time is running out for our own policymakers to mend their ways and offer real leadership to extricate the United States from its worst economic calamity since the 1930s. If we insist on improvising and not facing our real problems, we might soon lose our status as a country to be emulated and join the ranks of those nations we have patronized for so long.
Very true and the real lesson here is to abolish the policy makers (i.e. the Fed) and let the market do its job.
tgs – thats an interesting reading. Perhaps the US should follow the advice it gave everyone else.
I’ve been saying for months now that our nation is being Peronized, and now even the WaPo is starting to see it. I see little cause for optimism in the short run, our dear President being of the same kidney as Juan Peron, Getulio Vargas (and, by extension, their political paradigm: Benito Mussolini). Our fate will be no different from that of Argentina and Brazil. American exceptionalism cannot overcome massively foolish fiscal and monetary policy.
Peronization comes in three steps:
1. Create a ‘cult of personality’ around the leader. Check.
2. Nationalize the nation’s financial industry. In process.
3. Impose censorship. In planning.
Jeffersonian, I believe you are onto it.
At the cost of repeating what I said on earlier blogs and rephrasing it slightly. The US Congress did not, by itself, get us out of the Great Depression! Facing the threat of WWII and waking us up to join our allies to beat the Axis did more to get us out of it than anything else!!