You probably don't know me. I'm the one person in the world who explained and then predicted the magnitude and timing of the U.S. real estate bubble on the exact month of the peak in a professional economics journal (pages 37-8). Although that experience has, after the predicted 40% drop in median housing prices, run its course, a new problem has arisen. It concerns, of course, foreclosures.

Our country's leading financial officials (the heads of our Department of Treasury and Federal Reserve Bank) have proposed to bail out an enormous array of overpaid wall street phonies in order to become a foreclosing creditor for 700 billion dollars worth of real estate debt -- even though they know nothing whatever about collecting or foreclosing on non-performing real estate debt. They cannot possibly do their traditional jobs, which they have normally done quite respectably, under such an administrative burden. The mess would continue, perhaps even worsen.

All the Fed Chairman has to do is do is spend half that amount of fresh Federal Reserve Notes on U.S. Government Bonds and stop making a fool of himself by begging Congress for a favor that would just create a nightmare for him, and ergo the rest of us. What that simple inflationary monetary shock would do is immediately increase the U.S. price-level by just about 20%. The dollar would sink that much in the world's money markets and this would (1) stimulate our economy out of its current recessionary threat; (2) raise the value of real estate by 20% and immediately end the wave of current real estate foreclosures; and (3) immediately restore liquidity and financial flexibility to our banks and financial institutions so as to end our current financial woes on the spot.

Domestic creditors would suffer, but not much more than they would under the current wave of bankruptcies and foreclosures. In any case, because of this savings in process and transaction costs, our suffering debtors would gain much more than the creditors would lose.

Foreign creditors would lose at our expense, but they were speculating anyways and must bear the costs that any speculator occasionally must bear. While our current financial gurus, the guys who got us into this mess according to my above cited publication, worry about lowering the world's confidence in the U.S. economy and price-level stability, they should recognize that foreign investors in U.S. bonds have always known that, on occassion, the U.S. must -- for the health of the world's economy as well as her own -- adjust her domestic price level.

Earl Thompson is professor of economics at UCLA.