Naturally, other countries are both stunned and worried. America’s mishaps will amplify their own policy challenges, mostly importantly in Europe where severe dislocations are again evident in financial markets. With such evidence of dysfunctional economic governance in the US, some countries are also worried about America’s ability to perform its critical role as the anchor of the global financial system. Since there is no other country to assume this role, a weaker core translates into greater fragility for the system as a whole and, therefore, a higher risk of gradual fragmentation.
Vitus: This is an important issue and a long-time concern of El-Erain. See his book. Therein, he opines that the carrier of the flag of how to do economic policy, going forward, now that the City on a Hill has been shown to be Gomorrah Realized by our Art Deco Rentiers, might be the IMF. That is, he has not a clue - nor does Vitus.
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