Dear Prof. Frankel,

In the absence of European QE, you suggest that the ECB prints Euros to buy US Dollars. With respect, I wish to anticipate some moral hazards associated with this suggestion.

Since the era of QE, US Dollars are to a large degree simply US Government 30-year bonds mixed with US housing mortgages. The Federal Reserve has underwritten the US commercial banking system by hiding housing risk under cover of the lower risk of US Government default. The US Dollar has now become something akin to a Collateralized Debt Obligation (CDO). Major risks associated with this new instrument include the Tea Party.

Monetarists are no longer basing their decisions on the real economy, but on some hypothetical scenario which is predicated upon bond-yields in the American economy of year 2044. I worry that Mario Draghi, who inhabits the present bankrupt European economy, will start investing in Janet Yelland’s fantastical American economy of 30 years hence.

The Yelland vision is founded on the Bernanke incorporation of a 2008-style debt-instrument into the Federal Reserve QE Financing model. USD 4 trillion of this potentially toxic debt is now on the Fed’s balance sheet and on the balance sheets of various financial institutions world-wide.

Current ECB Chairman Draghi must also factor in the possibility that Future Federal Reserve Chairman, Robot Darth Vader, might not react as we expect.