OK Hillary, there's one thing I don't understand...

For having gone to the London School of Economics, you'd think I'd know something on the topic. But, much to the chagrin of my father, I have yet to take an economics course. That doesn't mean that I don't have an understanding of economic fundamentals, it just means that I have a difficult time answering the deeper questions.

I was just listening to the Democratic debate in South Carolina, and it started with Hillary touting her economic stimulus package.

As I was listening, I took notes, and here are the key points:

• $110 billion economic stimulus plan


• $70 billion goes to 'the mortgage crisis'


• Moratorium on home foreclosures for 90 days


• $650 to help offset high energy costs this winter


• Invest in green collar jobs


• Fund for communities who are dealing with housing crisis


• 5-year freeze on interest rates


• Rebates if anything left over

Ok, in terms of sheer monetary value, $110 billion is a bit less than Bush's $145 billion, but since we've already spent that times 10 (made up guess here) on the war in Iraq, maybe this is a good time to stop increasing our national deficit by a little. It's also probably better spent than Bush's proposed tax rebates...

$70 billion going to 'the mortgage crisis' is a little vague, but CNN forced her into soundbite mode. Presumably this is to help rescue the banks who have caused this situation to begin with and to keep 'sovereign funds' (xenophobic code word for outside investors with no loyalty to the US) from investing in American ventures.

Moratorium on home foreclosures for 90 days. This seems sensible to me, let's have a few months to figure things out and readjust.

$650 per qualified household to offset high energy costs? Not great. Let's start with installing low-energy light bulbs, being proactive about turning things off standby and not leaving unnecessary devices plugged in (and maybe as a longer-term solution we install outlets with switches on them like in the UK to help reduce consumption. If the American government is bothering to subsidise the TV digital switchover, you'd think we could subsidise energy-saving measures). Maybe we could also turn down the central heating and put on an extra two jumpers? Seriously, the US is still the largest energy consumer on the planet per capita, there's room for real cuts to be made.

Invest in green collar jobs. Great idea! Helps the environment, and is proactive to helping redefine America's edge in the global economy. Plus, see point above on energy reduction. Gold star, Hillary.

Fund for communities dealing with the mortgage crisis. Not against this one, but again, very vague.

5-year freeze on interest rates. Now this is one that I just simply do NOT understand. Hillary argues that we need stability to avoid more foreclosures. OK, but here's what I don't get:

One of the main ways that the US likes to deal with inflation is by raising and lowering interest rates (note the 75-basis-points reduction by the fed just yesterday). Higher rates make lending more expensive, reduces the amount of money in the market and helps tamp down prices. Now, worries of inflation are not usually far from an economist's mind, but the current situation seems particularly ripe for inflation: the US dollar is extremely weak, oil and gold are near all-time highs, there is a high risk of a worldwide food shortage, and government subsidies and the growth in biofuels have led to near record highs in comestible oils like palm, corn and soy. What about high energy prices, high food prices, and a weak dollar doesn't SCREAM inflation? Not to mention that with current rates of inflation in China, the price of manufactured goods is likely on the rise.

To me, high risk of inflation + no mechanism for controlling inflation = really bad idea!

So, Hillary, what am I not understanding? Are you not actually proposing to hold interest rates at the fed but only for mortgages? If that's the case, how exactly are you proposing to do that? What authority would you even have to do that?

If you are thinking federal interest rates, then how are you planning on controlling for inflation? Raising the value of the dollar globally (that would hurt exports, but I'm still not convinced that we should be trying to position the US as a manufacturing-driven export economy)? Pegging the dollar to the price of gold (with gold still near record highs, would this be helpful?)? Price fixing and subsidies for basic commodities (which generally seems like a bad idea. See, for example, Zimbabwe. Or even Egypt)? Holding down wages a la Gordon Brown's current fight with UK police officers (I thought Hillary wanted to support the middle class)?

Seriously, can anyone else out there explain this one to me, cause I don't get it!