US may suffer same fate as Argentina's economic collapse: study

There are 'troubling similarities' between US President Barack Obama's financial actions with those of policymakers during the Great Depression in 1930's, a new study has claimed, warning the country's policies might have the potential to consign it to a similar fate as Argentina.

Obama is committing the same mistakes as those made in the 1930s which sent US and parts of world into the worst economic crisis in history, claims the new research published by the Institute of Economic Affairs, a free-market think tank here.

Economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, co-authors of the paper, claim that the White House's billions of dollars bailout plans will backfire in the long run and delay a full economic recovery by several years, the Daily Telegraph reported.

"It is also not impossible that the US will experience the kind of economic collapse from first to third world status experienced by Argentina under the national-socialist governance of Juan Peron," Rowley was quoted by the paper.

Nobel laureate James Buchanan who has endorsed the paper said, "We have learnt some things from comparable experiences of the 1930s' Great Depression, perhaps enough to reduce the severity of the current contraction.

"But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work".

Obama's policies have the "potential to consign the US to a similar fate as Argentina, which suffered a painful and humiliating slide from first to third world status last century", according to the paper.

The study also challenges the view that Keynesian fiscal policies helped the US recover from the early 1930s Depression.

"[Franklin D Roosevelt's] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows," the paper says.

The study, recommends that the US return to a more laissez-faire economic system rather than further market intervention.