I see that Brad DeLong has come around to the point I made a couple of weeks ago, that we need to mitigate the risk to the United States of a European meltdown. Here’s his proposal for doing so:
The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash before the increase in eurorisk leads American finance to tighten credit again and send us down into the double dip.
The Federal Reserve Needs to do so now.
The greatest merit in that, I think, is that it is something that can be done quickly. It is not without its defects. In particular, it will provide a bonanza for those who have gone long European debt.
I’m open to suggestions for measures that could protect the U. S. without unduly rewarding those who were betting on the rent-seeking. Ideas?