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In the movie, Freedonia was suffering from severe financial problems, and these problems were so extreme that the governing council willingly allowed a crazy dictator named Rufus T. Firefly (played by Groucho Marx) to take control and run the country. Firefly promptly declared war on a neighboring country just for the hell of it.
In the 1990s, the satirical magazine Spy pulled a practical joke on several members of Congress. The magazine successfully convinced several Congressional members to issue statements condemning the "ethnic cleansing in Freedonia," without their realizing that Freedonia was a fictional country.