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Op-Ed: What Real Stimulus Looks Like


Twelve ways we can be part of the solution.

Editor's Note: James Quinn is a senior director of strategic planning for a major university. James has held high-level financial positions with a retailer, homebuilder and a university in his 22-year career. He can be found online at

The $787 billion, 1,074 page stimulus bill has been passed. President Obama has signed it. The market immediately dropped 500 points - and the bill will stimulate nothing but the national debt.

Ray Dalio, of Bridgewater Associates, recently argued that American consumers, companies and government must accept the pain of debt restructuring to get our economy back to normal:

"It isn't complicated. It is the same as all bankruptcies, but when it happens pervasively to a country, and the country has a lot of foreign debt denominated in its own currency, it is preferable to print money and devalue. The biggest issue is that if you look at the borrowers, you don't want to lend to them... The Federal Reserve is going to have to print money. The deficits will be greater than the savings. So you will see the Federal Reserve buy long-term Treasury bonds, as it did in the Great Depression. We are in a position where that will eventually create a problem for currencies and drive assets to gold."

The debt service as a percentage of disposable income is currently above Great Depression levels. These levels are unsustainable. Consumers normally have a limited number of choices. They can declare bankruptcy to wipe out the debt or reduce spending dramatically while paying down their debt. This is what's required to purge our capitalist system of its excesses.

Instead, our government is coming to the rescue with your tax dollars. You've already given $7 billion to Capital One (COF) and American Express (AXP), along with $9 billion to GM (GM) and Chrysler.

The stimulus plan will similarly disappoint. If we don't let people and companies fail, we merely encourage the same behavior that caused the problems in the first place.

Pastor Adrian Rogers recently explained how many Americans feel today: "What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. ...You cannot multiply wealth by dividing it."

And it looks like we are going to find out if Dick Cheney was right when he said that deficits don't matter: The annual deficit for 2009 is now estimated at between $2 trillion and $3 trillion.

These figures seem incomprehensible to the average person; some perspective is in order. If we use $2.5 trillion as the estimated deficit, that means we're adding to it to the tune of $6.85 billion per day, $285 million per hour, $4.8 million per minute.

We're currently paying only 3.4% on our 30-year Treasuries, and there's always enough demand. The dollar continues to be steady versus the euro. Government debt as a percentage of GDP was 122% during World War II, versus only 78% today.
No positions in stocks mentioned.

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