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The world is calling for bold leadership from the United States. We now have the means to answer that call.

With interest rates hovering around 1.6% for a ten-year Treasury, and government bonds in Europe for countries like Spain or Italy moving into the 7% range, the United States is in a position to stabilize the financial system and make money in the process. How? The United States should issue new debt and use the proceeds to purchase bonds issued by troubled governments in Europe on the open market, earn a substantial spread on the interest rate differential, and use the income off that spread to either (1) fund new domestic government spending; and/or (2) reduce taxes. We may accomplish this all without increasing our net deficit, since every dollar of new U.S. borrowing will be used to purchase an equal and offsetting amount of European assets.

This program will offer the following benefits:

(1) The program will signal U.S. confidence in the European debt markets and inspire other investors to purchase European debt, driving down interest rates and easing the flow of European bank lending;

(2) Large U.S. purchases of European sovereign debt will reduce the supply of outstanding European sovereign bonds, further driving down European interest rates;

(3) Lower interest rates in Europe will create more flexibility for governments in Europe to move back from failed austerity programs and focus on growth-enhancing policies;

(4) By purchasing European sovereign debt, the United States will earn its place as a direct participant in the European discussion on how to enhance economic growth going forward;

(5) The U.S. should be able to negotiate loan guarantees on European sovereign debt that it purchases - perhaps by seeking guarantees from the I.M.F., the E.U. central bank, Germany and other countries or international bodies with a direct stake in the European outcome;

(6) Stabilizing European debt markets will have a salutary impact on risk appetite across all asset markets, and will very likely lead to a rally in global equities and other risky assets. This will create an immediate wealth effect that should support increased consumer spending and new investment, providing a global kick start to growth;

(7) The United States can use the capital it will earn off the interest rate spread to fund tax cuts, which will trigger economic growth, and/ or to fund new domestic spending programs, which will trigger economic growth; and

(8) Increased global growth will lead to larger tax revenues in Europe as well as in the United States, enabling governments on both sides of the Atlantic to reduce deficits and place themselves onto a more sustainable fiscal path going forward.

What the E.U. needs now is not a willingness to address structural change and integration. What the E.U. needs now is time to do so. But a tighter European union on its own may not be sufficient to stave off the ongoing European debt crisis. A tighter European and American union, however, has a proven track record of success, as we saw with the first Marshall plan implemented in the aftermath of World War II.

The fate of the American economy is inextricably intertwined with that of the European economy. But more than that, European countries are our allies, and in times of stress, allies stick together. A second Marshall plan will foster lasting good will among the United States and Europe, and it will foster direct and indirect benefits to the United States in the form of enhanced prospects global growth and global stability in the financial markets. More directly, it will provide an instant source of desperately needed cash flow to the Federal government without having to raise taxes or increase our net deficit. The time has come for bold action from the United States, and the prevailing interest rate spread on U.S. verses European sovereign debt has created the opportunity to make that bold action profitable to governments on both sides of the Atlantic.

Source: Marshall Plan II

Additional disclosure: I am not a registered investment advisor. No investor should rely on any statement in this article when making investment choices.