In recent months it has been fascinating to observe policymakers' responses to the financial tailspin. However, according to Simon Johnson (former Chief Economist of the IMF) in this article ('The Quiet Coup', from The Atlantic Monthly) two further major responses are necessary: nationalise the banks; and break up the financial oligarchy that rules in America.
Whilst the former suggestion has been much discussed, it is the latter notion, of breaking the financial oligarchy in the US, that is perhaps Johnson's most interesting and controversial point. Drawing a parallel with his experiences with emerging markets during his IMF days, Johnson posits that there exists a 'revolving door' between Wall Street investment banks and the political establishment, to the point where a stint at Goldman Sachs is almost a prerequisite for public service at the highest level. Below an interview with Mr Johnson concerning his article:
Thus the essential message behind Johnson's article is that - like many emerging markets - the US government has been captured by the finance industry. Until the government frees itself from the influence of those whom it is supposed to be regulating, efforts at recovery will fail.
All in all, a fascinating piece from a guy who has been up close and personal with his fair share of banana republics!!!
**Thanks to Daniela Benavente for pointing me in the direction of this article!!