Robert: Do you think the $700 billion rescue plan will get us out of this mess?

Gerald: It might do some good, but this crisis goes beyond what that plan can do for us. The main problem is not liquidity or cash savings options for banks that are in bad shape. We need a plan where home owners can pay for their mortgages. That way, bad debts will see some reasonable improvement.

Robert: Well, since the late 70’s, our main means for economic growth has been centered on the bubble model. This model centers on getting into debt to finance economic growth in unproductive ways. We have dismantled whole sectors of the economy to finance projects like house building on a large scale, far beyond the real demand of the house market. That is why our marketing percentage of the GDP today is only 10%.

Gerald: So debt and speculation worked side by side?

Robert: Yes, global banks weren’t concerned about the repayment of loans. Instead they thought of loans as investments to be later sold to other institutions at a profit. In the past 7 years, private debt in our country has more than doubled. Today it is over $14.5 trillion. The federal government’s debt is only $9.3 trillion. The sum of public and private debt is approximately 169% of the GDP. These numbers have not been seen since World War II.

Gerald: That’s interesting. I know that from 2001 to 2008, debt was accompanied by a 2.57% rate of low economic growth. We were only capable of generating 6 million new jobs, and of that number only 4.3% were related to productive investment from the private sector.

Robert: So this debt we have gotten into has not been applied to productive investments?

Gerald: Right. We need a macroeconomic model and policies that will help us to increase the well being of our society. We also need a powerful new industrial and clean national energy model, and projects to get away from the present greed based model. We need to reinvent ourselves.