How the US Became a Banana Republic
America is a textbook IMF case—but one without a solution
By Jason Farago,  Newser Staff
Posted Mar 30, 2009 2:51 PM CDT
The United States bears the hallmarks of an emerging market economy on the verge of collapse, according to the former chief economist at the IMF.   (©Nrbelex)
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(Newser) – As chief economist at the International Monetary Fund, MIT professor Simon Johnson saw a pattern in bankrupted countries from Argentina to Indonesia: "The powerful elites within them overreached in good times and took too many risks." The current US crisis, Johnson writes in the Atlantic, is "shockingly reminiscent" of an emerging-market basket case—and just as in developing countries, financiers are using government connections "to prevent precisely the sorts of reforms that are needed."

In a typical IMF case, the troubled country has no choice but to swallow its medicine, squeezing oligarchs and breaking up troubled banks. But while the US has the woes of an emerging economy, it has the hubris of a superpower and "could very well stumble along for years." The upshot: We face a crisis that could be "worse than the Great Depression" unless government breaks up the system that currently has it in a stranglehold.