So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.
As a friend said last night, we’ve become a banana republic with nukes.

September 26, Paul Krugman.

In recent months I have followed this crisis in American financial market with great interest. And I must admit I am surprised with such incompetence!

A year ago the problems in the U.S. Real state market began to gain prominence in leading newspapers because of bad debts of debtors who failed to pay its debts (I love alliteration). Much has been said then that it could become a much bigger problem, because the mortgage companies attracted funds and investment banks, all hand in hand in search of a bigger profit.

As time marches on, things got worse and I could not understand why the government does not intervene. It seemed irrational leave everything in the hands of the “market”. As if all problems could be solved magically.

Well, the time has passed and now the situation is worse than ever. The U.S. government must intervene to save the big banks that succumbed due to their own greed; they are going down because in 2005 and 2006 they did what shouldn’t have done. And now the most capitalist country in the world has to resort to socialists methods. This is absurdly ironic and awful: do not share the profits, but the losses should be socialized?

Here in Brazil we are accustomed to such crises. In the late 90’s there were crises in Malaysia, Turkey, Russia, Mexico and South Korea; since then, the Brazilian government developed a plan to prevent such financial crises from reaching the Brazilian economy.

First, the government must always have a surplus of more than 4% a year. Second, the international reserves which stood at USD 40 billion, are now USD 210 billion. Third, the government (through the Central Bank) intervenes heavily in the economy, to prevent such crises from happening again.

For decades we heard from the U.S. and the IMF what we should do, as if they had the all solutions for all problems. Now, the U.S. seems a dog running after it own tail! And to complicate, the parliamentarians did not come into agreement. I think Paul Krugman is right in saying that the United States is becoming the largest republic of bananas on the planet!