For the first time in a while, we have some good analysis from — wait for it — Paul Krugman. Krugman starts off on an alarmist note, worrying the the US’s massive budget and trade deficits are much like those of Indonesia in 1996 and Argentina in 2000.
Then he examines our strengths:
So is America safe, despite its scary numbers?
Third world countries typically suffer from institutional weaknesses. They have poor corporate governance: you can’t trust business accounting, and insiders often enrich themselves at stockholders’ expense. Meanwhile, cronyism is rampant, with close personal and financial links between powerful politicians and the very companies that benefit from public largesse. Luckily, in America we don’t have any of these weaknesses. Oh, wait. . . . (Isn’t that all history? No. According to The Wall Street Journal, we are again hearing warnings that “optimism is based on massaged earnings.”)
Still, there’s no question that the U.S. has the resources to climb out of its financial hole. The question is whether it has the political will.
There’s more to the story, and I suggest you read the whole thing.