I would first like to state that I imply no criticism of Joseph Gagnon, the Fed, or Fed policy. The outlined policy is rather a traditional policy in the Keynesian sense, but I do not think such Fed action will bring any relief to the economy as it now stands. I agree with Joseph that Interest on bank reserves should be eliminated; though I would suggest a permanent end as such action should never have been introduced. Targeting 4-year Treasuries for Interest rate suppression, though, will bring distortions to the Bond markets; automatically further crippling the Consumption market over the long-term. The real error of the Fed must consist of trying to target Interest rates in the first place, always producing a skew in real capital return results over any significant period.
The Fed needs to target industrial sector development as the real Solution to the current economic waywardness. I do not know if the Fed has the empowerment to following my following program, but if not, it should petition Congress for extension of its charter. My concept would have the Fed purchasing Mortgages of subordinate governments (State and Local) for the improvement of infrastructure at the same rates that they purchase short-term Treasuries. This is the incentive for subordinate governments to improve Roads, Water systems, Sewage systems, Parks and Recreational facilities. Constant rate mortgages would not be a viable hazard to the Fed, while subordinate governments and Fed will retain the ability to renegotiate the mortgages without Interest rate changes; such things as extension of the pay periods, length of the pay periods, and conditional increases in mortgage size to handle Upgrades and Improvements. Here you get a massive infusion of Cash into the heavier Employment sectors, with little loss of either Fed control or mortgage risk.
The real need of the economy resides in Employment increase. There will not be increase in Consumer Demand without increase in Labor Rolls. The real value of my program is the end of the attempt to fuel the entire economy with Cash, when so much of the economy could act profitably with restructure; all of which will not be conducted with the easy flow of Cash at such low Interest rates. We need to get Americans back to Work, if We want a better economy! lgl