The Stimulus Plan Will Disastrously Fail

The U.S. economy is collapsing.

In response, the government is rushing through another stimulus program. But as we saw in Japan during the "lost decade" of the 1990's and early 2000's and also during the New Deal of the 1930's, when America tried to spend its way out of the Great Depression, no giant stimulus plan is going to rescue it.

Despite last year's massive corporate bailout and last July's stimulus when the public got government rebate checks to spend, the situation has only grown worse. But of course new bailouts are in the works.

With the passage of the latest stimulus plan, there will at first be euphoria as Barack Obama uses his considerable oratory skills to promote it heavily. When this stimulus fails us as the others have, it will thrust our nation even deeper into debt.

Think of it like a guy who ran up huge credit card bills who can no longer afford to make the payments. In desperation, he tries to borrow more money rather than to face his day of reckoning. But eventually he will be forced to confront that painful day.

For now, the U.S. can borrow money because major lenders like China, Japan and Saudi Arabia are still loaning. But as America's debts mushroom, they are becoming seriously concerned. China recently said it publicly.

In addition, their economies are getting hit hard and they may need to keep much of their money at home to deal with their domestic needs. And with the abyss the global economy is facing, these nations may simply run out of money to invest elsewhere.

In any case, it is sheer arrogance for the U.S. to expect other countries to subsidize tax breaks it wants to handout, the rebuilding of its infrastructure and the rich lifestyle to which it is accustomed but long ago could no longer afford.

How bad is the America's situation? Not counting the gargantuan and never ending trade deficits, let's focus on government spending. Last year's deficit hit a whopping $455 billion. Now it is estimated it could reach a staggering $2.5 trillion this year!

But with the latest stimulus and bailout plans, no-one knows how high it will actually go. And there is no end in sight to these massive trillion dollar deficits.

To fund them the U.S. government is counting on global investors to buy ever greater amounts of U.S. debt but if they instead cut back their purchases, two ugly scenarios take place:

1) In order to attract funds, the U.S. will be forced to sharply raise interest rates. This will compound the already skyrocketing growth of the deficit.

2-A) The U.S. still won't be able to borrow enough money and so it will run the printing presses to make up the shortfall. The result of this action will be too many dollars chasing too few goods which will bring monumental inflation. The Fed has already begun to run the printing presses as of last September.

2-B) But it gets worse. The latest bailout is meant to flood the economic system with money. Its shortfall could be an astounding $2.5 trillion! The first $350-billion is supposed to come from what remains of the prior bailout money. The rest, aside from any money private investors provide in a plan not yet devised, is to be created by the Federal Reserve simply printing the money.

2-C) The value of the dollar is only that which we believe it to be, for since 1971, it has not been backed by gold or any other assets. If the Federal Reserve just creates tons of dollars out of the blue, the dollar will lose its credibility and with it, it's value.

How will you and I be affected by the disasterous failures of the stimulus and bailout plans? We will all be impacted by the terrible economic times to come. Some of your and my family and friends will lose their jobs, and may lose their homes. So might you and I. We must learn to live with less and to be generous in sharing what we have with others for we need to come together as family and as humanity to weather this frightful storm.

But we will survive it. And hopefully we will stop wasting our resources on weapons and wars and stop our vast consumption of much of the world's goods. Instead, we could become a more compassionate and giving people.

We could help pay for Malaria vaccines which would save millions of lives in poor nations. We could help to feed the hungry, invest in education, focus on cures for Cancer, Multiple Sclerosis and other dreaded diseases and invest in technology to heal and protect the earth. We could uplift the lives of tremendous numbers of people whose lives are mired in hoplessness and poverty.

If that seems impossible to you, think of what we've spent on weapons and wars in recent years and you'll realize the resources were there if only we had used them more wisely. But it's not too late. When our economy eventually recovers we could still become a beacon of light for the world, a blessing to all.

Dick