Friday, March 27, 2009

What the IMF would tell the US if it could


Great reading, from May edition of The Atlantic, posted early on line

"Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks.

Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders."

2 comments:

cj said...

This is one of the best essays on the GFC that I have read.

While his insights are extremely controversial, they are largely correct.

The only beefs I have are:

(1) I don’t think he identifies the true origins of the US crisis and the key structural flaws inherent in the US financial system, which I outlined here: http://www.rgemonitor.com/emergingmarkets-monitor/255932/dismantle_and_start_again (and which seems to be resonating with a lot of folks) and;

(2) I don’t agree with one of his prescriptions, which is breaking up the banks into smaller pieces after they are first nationalized and then re-privatised.

But otherwise, it is an incredibly good read and well worthwhile spending some time considering...

Anonymous said...

Same same. What happened in US = What happened in Austalia.

"But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector."

Only difference, Aus is awash with more private debt than the US. And still the Aus govt does nothing to rein in the banking sector irresponsible lending practices or remove speculative elements of the tax system such as Interest only loans or Negative gearing.

What is govt strategy?

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