

Ex-IMF Official: the U.S. is coming to resemble Argentina, Russia - gasull
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032502226.html

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fauigerzigerk
I think he is wrong. My perception is that the US government is very aware of
the fundamental issue that is the US current account deficit. Yes the low
savings rate of the recent decade is a huge problem, but right now the savings
rate is rising at an incredible pace.

Accepting the savings rate and current account balance must be brought back to
a sustainable level does not mean the current turbulent readjustment should
not be counteracted. This is not inconsistency, it's a timing issue. Ignoring
this fact is plain populism, which doesn't surprise me coming from a fellow at
a Rpublican think tank.

Secondly, the comparison to Russia in particular is ridiculous. Russia is
uniquely dependent on oil and gas. Looking back at Russia's depression and its
current troubles, it's hard to ignore the correlation with crude prices
(<http://www.wtrg.com/oil_graphs/oilprice1947.gif>). Oil revenues pay for
everything in Russia.

There's another unique feature in the comparison to emerging market crises
that he ignores. All these Asian and Latin American countries were indebted in
foreign currency and much of their troubles were connected to rapidly changing
exchange rates that increased their debt. The US debt, however, is USD debt.
The US cannot default on USD debt as the government can print money and
inflate the debt away. That's what the Chinese are so scared of.

Also, the US has a huge domestic market, a very broad industrial basis as well
as an unrivaled culture of innovation and entrepreneurship.

The current crisis is bad and there are indeed huge issues to overcome. The
crisis will continue, but comparisons with the Asian crisis of 1997 or the
Russia of 1998 are meaningless. If things should go catastrophically wrong in
the US, they will do so in a unique way, not based on some emerging markets
template from the 90s.

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allertonm
Another ex-IMF economist saying very similar things:
<http://www.theatlantic.com/doc/200905/imf-advice>

(A great read, by the way - even if you are already familiar with Simon
Johnson's opinions by way of NPR's "Planet Money" podcast.)

~~~
trevelyan
> Desmond Lachman, a fellow at the American Enterprise Institute

If there is a lesson to be learnt in the last 30 years of the American
experience with economics, it is to keep the American Enterprise Institute and
anyone associated with it as far away from policy-making as possible.

[http://delong.typepad.com/sdj/2009/02/debt-to-gdp-since-
the-...](http://delong.typepad.com/sdj/2009/02/debt-to-gdp-since-
the-1920s.html)

These people have zero credibility on anything debt-related until they
repudiate their party's economic policies under Reagan and Bush II, both
periods when it should not have been necessary for the US to radically
increase its debt burden. The sudden concern of these people for US debt
levels is entirely transparent, and entirely hypocritical. Lest we forget they
were also a major proponent of social security reform (translation:
Republican-championed efforts to invest Social Security funds directly in the
stock market in ways that would generate private management fees).

Good thing that didn't happen. As controversial as bailing out the banks are,
it would be worse if the Democrats now had to bail out people who just blew
everyone's retirement savings too.

~~~
anamax
> These people have zero credibility on anything debt-related until they
> repudiate their party's economic policies under Reagan and Bush II, both
> periods when it should not have been necessary for the US to radically
> increase its debt burden.

Reagan's spending was during a recession, which is when the standard theory
says that govts should go into debt. I note that the folks on the left didn't
want less spending at that time - they wanted far more. And, they were in a
position to cut a lot of spending and refused.

As to Bush II, the only opposition from the left to any of his spending
increases (other than Iraq) was that it wasn't enough. Since debt is the
difference between revenue and spending, anyone who advocates increased
spending when revenues are not increasing even more is advocating increased
debt.

> Lest we forget they were also a major proponent of social security reform
> (translation: Republican-championed efforts to invest Social Security funds
> directly in the stock market in ways that would generate private management
> fees).

Because Ghod knows that a govt worker will always do the right thing and for
less.

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robotrout
I am very seriously trying to get my head around all of this, so as to
position myself properly. Short bonds, long gold, etc. for the impending
inflation and our battle with it. Like the author, I also share a deep unease
with this level of spending.

However, in reading this piece, I felt it was overdone. I've been paying
attention, and I haven't noted many of the things that the author notes.
Paulson and Geitner and Bernanke"at sea", for instance. I haven't seen
evidence of that, except for Geitner's "we plan to have a plan soon" speech,
but he's since rectified that. I also haven't seen evidence of Wall Street
being overly influential in Washington, but instead, Washington is now overly
influential on Wall Street. I just feel he stretched a little far on this
article, with a definite goal to scare anybody that hadn't been paying
attention.

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cmars232
One also must consider that the IMF and the people associated with the IMF
probably have their own agenda, and the US has unique resources at its
disposal.

Makes for a good headline though, doesn't it?

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ajkirwin
What unique resources does the US have?

~~~
sown
I can think of one: all US debt is printed in US dollars and there is only one
source of us dollars.

I'm not sure how big of a deal that is.

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patrickg-zill
Any official talking about this will say "Argentina" or "Russia" because it is
politically incorrect to say "Weimar Republic".

