Is the U.S. debt problem as big as the 1990s Latin America crisis?
The 1990s and early part of the 2000s nearly bankrupted governments in the Americas. Defaults and threats of defaults were common. The US, led by the Republican Party, is itching for at least a partial default. China says they`re playing with fire. Has the US become the new Argentina?
Not too long ago, when news pundits and fund managers talked warily about government debt, it was about the potential of defaults in countries like Argentina, Brazil and Mexico. Today, the risk of credit downgrading and talks of default ` however political in nature ` aren`t coming from Buenos Aires, but from Washington. In the new Bizarro World that is the global economy post-2008, the US is the debt bomb waiting to explode while major nations like Brazil are mostly busy running surpluses.
`We do have a tale of two Americas,` says Eliot Kalter, senior fellow at the Fletcher School at Tufts University and president of EM Strategies, a Washington-based consultancy for those conducting business with emerging market countries. `Brazil, like many other countries in Latin America, learned the hard lesson that it is difficult to regain control of an economy once the debt dynamics turn against you.`
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