Is America the new Russia?

[katty]

more: http://www.ft.com/cms/s/0/09f8c996-2930-11de-bc5e-00144feabdc0.html

Is America the new Russia?
By Martin Wolf

Published: April 14 2009 21:47 | Last updated: April 14 2009 21:47

Is the US Russia? The question seems provocative, if not outrageous. Yet the person asking it is Simon Johnson, former chief economist at the International Monetary Fund and a professor at the Sloan School of Management at the Massachusetts Institute of Technology. In an article in the May issue of the Atlantic Monthly, Prof Johnson compares the hold of the “financial oligarchy” over US policy with that of business elites in emerging countries. Do such comparisons make sense? The answer is Yes, but only up to a point.

“In its depth and suddenness,” argues Prof Johnson, “the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets.” The similarity is evident: large inflows of foreign capital; torrid credit growth; excessive leverage; bubbles in asset prices, particularly property; and, finally, asset-price collapses and financial catastrophe.

Adds Prof Johnson, “there’s a deeper and more disturbing similarity: elite business interests – financiers, in the case of the US – played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.” Moreover, “the great wealth that the financial sector created and concentrated gave bankers enormous political weight.”

Now, argues Prof Johnson, the weight of the financial sector is preventing resolution of the crisis. Banks “do not want to recognise the full extent of their losses, because that would likely expose them as insolvent ... This behaviour is corrosive: unhealthy banks either do not lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all.

[bemildred]

1. The USA is any large country where the political system has become disfunctional.

Rome, the British Empire, the USSR, there is a very long list. The symptoms are manifest, and have been so since the post-Vietnam failure of political reform. Russia does not really apply unless he means the Russia of the Czars. People have been writing books about the problem since at least the 70s too, and in the long sweep of it, they have had it right. One after another these books are ignored, the grievances of the public are ignored, we continue to wallow in debt and disfunction. Even if we are too big to fail, in the end we will not be too big to collapse in one manner or another.

[katty]

2. yep concur-it will occur one way or another

[Doctor_J]

3. The Bush cabal is far more corrupt than the Kremlin ever was

but the Limbeciles are about on a par with the Communist Party apparatchik

[OwnedByFerrets]

4. Its very possible.