You know, it must be tough for US policymakers sometimes. I mean, when the thing you did yesterday was as dumb as all heck, how do you cap it? How could you possibly go one better, waste more money, burn more taxpayer cash?

Shucks, it's only a few hundred billion

But we shouldn’t be such worryworts. The creative capacity of our policymakers continually delivers surprises that beat all previous benchmarks for ineptitude – which is quite impressive, given that those past benchmarks include a budget deficit of more than $1,000 billion and a “super-committee” which failed to save a single dime of taxpayer cash.

But the Fed has gone one better. At least a trillion dollar budget deficit means that non-existent cash is being spent on Americans. The latest round of “liquidity support” means that the Federal Reserve is making dollars available to the major central banks elsewhere, so that they in turn can on-lend to cash-strapped banks.

In Ben Bernanke’s ivory tower, I imagine there’s a careful logic there. On Planet Reality, however, the math here looks pretty simple. The Fed is charged with managing monetary policy- and it seems to be doing all it can to put currency in the hands of institutions that cannot borrow freely from the market. Basically, Uncle Sam is offering a subsidised rate to European banks that the market belives to be in real danger. Some of those European banks – the ones that most want to get their hands on Uncle Sam’s cash – are in danger of extinction.

So why are American taxpayers bailing them out? I mean, it was insane enough to bail out AIG at taxpayer expense with loans that can NEVER be repaid, but at least that most stupid of insurance companies was a US entity. Why are American dollars going to French banks? To Italian ones? To Spanish ones? The exposure is to the Euro and Euro denominated toxic debt.

And don’t kid yourself, if you’re a US citizen, that these things cost you nothing. There is a firm relationship between the level of US economic output and the quantity of US currency in circulation. If you create a load more currency and don’t create a load more goods and services, then that currency has just become worth less. If you take that currency and put it in the hands of responsible institutions abroad, it’s kind of strange that you’re choosing to help your friends with the currency that US taxpayers find in their pockets. But to take that currency and put it into the hands of the kind of banks the market doesn’t want to know about – it’s a new kind of monetary insanity.

‘Helicopter Ben‘ Bernanke got his nickmame because he wanted to shower US taxpayers with cash. But I can hear those rotor blades overhead right now. And I’m not in Manhattan today. I’m in Europe.