Stimulus Vs. Bailout by Jim Pinto

Especially over the last decade, the US became a bubble economy that needed unlimited credit to keep from collapsing. Our true wealth did not increase - the value of homes and stocks were inflated. And consumers enjoyed a high standard of living based on that illusion.

The bubble has now burst. The financial crisis is breaking habits that need to be broken.

By bailing out banks that went bankrupt through bad loans, bad behavior is being perpetuated. Banks received most of the first $350B bailout, yet few know what happened to that money. Banks are still reluctant to lend, worrying that they will be in worse shape if the economy deteriorates. So foreclosures are increasing and joblessness skyrockets. Indeed, no one really knows where bottom is.

Consider this: Credit is vital to an economy. Business loans lead to greater productivity. But consumer loans are simply wasted, because they only gratify immediate "wants". Leasing new cars and buying new homes became ways to demonstrate status which was fake. Financing consumer spending - and debt - is ridiculous. Now that reality is finally sinking in.

The acknowledged Recession moves towards the D-word and everyone is asking for bailouts. The auto-industry executives flew in their private jets to ask Congress for help. Popular NY Times' columnist Tom Friedman wrote:

"Our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalog business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of iPod and iTunes. It will be remembered as pouring billions of dollars into book-store chains on the eve of the birth of Amazon.com and Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet."

Detroit didn't need to make Hummers. But they did, and sold them to fools who enjoyed the false sense of power, with poor mileage. Now, when it's too late, we strive to reform.

The new President and Congress keep debating the $800B economic stimulus plan. ALL the money should be spent on stimulating productivity - NOT old consumerism. Let's repair old roads and bridges and build new ones; let's develop new energy resources and the green economy; let's modernize our health-care and education systems; let's consume less and produce more.

Let's swallow the medicine and work towards kicking the old bad habits. Let's return to a productive, value-based culture. You know what? I'm glad those "good old days" are over.

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