Posted Thursday, June 28, 2012, at 4:46 PM
Large-scale government ownership of the means of production seems like an unsound idea to me, but I'm glad to see Joe Gagnon call for it if only to ensure that I can now triangulate to a more moderate view:
The best alternative would be to purchase exchange-traded funds of the total US stock market. That would have broad-based benefits, repairing household balance sheets and unlocking consumption and investment. Unfortunately, the Fed is not authorized to buy equities and Congress is not likely to grant it that power anytime soon.
That strikes me as an unnecessarily provocative move. Simply announcing that the Fed is prepared to tolerate inflation in the Reagan-era 4-5% range until unemployment falls to some acceptable level combined with a much more modest program of asset purchases should work fine. Having the Federal Reserve own equity stakes in American firms would raise a lot of corporate governance and other issues that are best left out.