A brilliant solution

Former FDIC head Sheila Bair fixes the economy:

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years…. And while that deal blew bigger holes in the deficit, my proposal won’t cost taxpayers anything because the Fed is just going to print the money. All we need is about $1,200 trillion, or $10 million for 120 million households. We will all cross our hearts and promise to pay the money back in full after 10 years so the Fed won’t lose any dough.

One rather gets the idea that Sheila has a certain lack of confidence in Ben Shalom’s ability to successfully extricate the U.S. economy from the 30-year debt bubble the Fed created. The frightening thing is that her Swiftian solution differs only in its degree from the strategy that Bernanke is actually utilizing. Bernanke is trying to continuously inflate just enough to prevent massive default and deflation, but this is akin to bailing water rather than fixing the big hole in the bottom of the boat… and without any land in sight.