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U.S. lectures other countries in times of fiscal crisis, but doesn’t get the same treatment

For South Korea, the prescription was a “tough medicine” of budget cuts and bank closings. For Argentina it was a “tough . . . but very necessary” overhaul of government policy. And for Mexico and a host of Latin nations, the formula was debt relief in exchange for a turn toward U.S.-style market economics.

When countries get into trouble with spending and debt, the United States is never shy about giving advice or using its financial clout to enforce it.

The rest of the world has no such leverage over the U.S. as it careens toward a deadline tomorrow and possible sovereign default.

Even as it puts other countries at risk, the U.S. is able to behave as it does because of the dollar’s privileged status as the world’s main reserve currency. The dollar and the mammoth market for securities issued by the U.S. Treasury serve a number of roles in the world economy – functioning for some as a money management tool to stash excess cash, for others as a broadly accepted means of exchanging goods and services.

Other types of money can serve those roles. But the U.S. is the only country with a large enough market, a freely traded currency and sound enough credit to absorb virtually any amount of money that the global financial system demands.

The paradox: That also means there are fewer constraints on its leaders.

Just ask former Italian premier Silvio Berlusconi, forced from office in 2011 over that country’s budget problems by the same sort of outside pressure missing from the current U.S. debate.

When other nations manage their finances irresponsibly, or get caught shorthanded by a change in economic conditions, markets shut them out and a debt crisis ensues. Sometimes that ends in default, sometimes in a restructuring, almost always with economic damage.

With D-Day approaching in Washington, there’s no sense that world markets or organizations such as the International Monetary Fund could or would put the same binders on the U.S. that they did on Greece during the recent euro crisis, or on dozens of other nations in times of financial duress.

The U.S. and IMF never came to terms with Argentina in 2001, and a default ensued that is still being worked out. The U.S. pushed demands for the end of “crony capitalism” in Indonesia and leaned heavily on Europe over the past three years to come to grips with the fact that Greece was insolvent.

But the U.S. itself? Foreign leaders have had to settle for a demand from the sidelines: Please follow your own advice.

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