And Russel200 said:
“Many in the rest of the world appear to have thought it was a good idea – they did buy the debt after all.”

I guess it just goes to show that trust is “sticky.”

— Laughingsong

I happened to live in the classic ‘banana republic’ (Guatemala) for a number of years, returning to the states just in time for the early 1980s double slump. By the mid or later 1980s I recall thinking “we are becoming Guatemala and it’s suffering still more undevelopment”.

The thought arose not simply from the weak economic performance but the increasing ‘casualization’ of the labor market here in the U.S. on one hand and greater concentration of capital on the other, with both being facilitated through state policies.

Talk about being hoist on one’s own petard. The term Banana Republic came from American fruit companies becoming more powerful than their host countries’ governments, forcing the “Banana Republics” to serve American corporate interests over the interests of their own citizens. Now that the American firms have finished off Central and South America, they have started feasting on our own country.

Chiquita Banana, Goldman Sachs. Is there much of a difference?

Higher now, yes. What about long-term? Not the long-term “we’ll all be dead” type, but say 5 to 10 years?

How much holes in the dyke can be patched before the dam brakes and we get flooded?

Fannie and Freddie (at least according to Tanta) were sent their private little way to get the government debt off the books: a response to the Vietnam War run up in debt.

So this time we are having our expensive little war(s) and bringing the debt back on the books.

The US Government tried to grab a large junk of the Middle East’s oil supplies and buy up the entire US housing stock (at inflated prices) at the same time. Many in the rest of the world appear to have thought it was a good idea – they did buy the debt after all.

I wager that 90% of bears are deflationists. They argue that with an economic collapse come low inflation and low interest rates. Exhibit A is the Great Depression. Exhibit B is post-bubble Japan.

Exhibits A-Z, and then some, for the inflationists, are the emerging markets. There, inflation and depression have cohabitated with the regularity of a married couple.

Is the U.S. a Banana Republic? If so, then its sovereign risk premium should be rising, no, rocketing higher. Adding high interest rates to the already toxic credit crisis mix means…oh well, it means we are all too bullish.

In the case of a Banana Republic, the U.S. would already be sending in the ball busters. The demand would be for zero growth in the money supply, massive cuts in government spending, more privitization and less regulation.

Dr. Jekyll and Mr. Hyde, as Carlos Fuentes calls it. What is good for the goose is definitely not good for the gander.