A plan to reinvigorate the economy

I approve of Joe Gagnon's approach:



- The Fed launches a new $2 trillion round of quantitative easing with a commitment to further action if the economy remains weak



- The Fed lowers the interest paid on reserves to zero



- The Obama Administration instructs Fannie Mae and Freddie Mac to allow all homeowners current on their mortgage payments to refinance regardless of loan-to-value ratio



- The Obama Administration makes a strong effort for mortgage modifications for distressed mortgage borrowers



- The Treasury renounces its "strong dollar" policy, allowing a broad-based depreciation.



I endorse Paul Krugman's caveat: the Fed should not reassure markets that it will switch course if inflation rises above 3 percent. In fact, the Fed should promise that it will continue to make purchases as long as inflation is below 3 percent for a few years.



I also support the establishment of an infrastructure bank in legislation attached to the highway bill that is under consideration in Congress, and an extension of the payroll tax holiday and unemployment compensation.



Everything but the last three proposals can be done by the Obama Administration and Fed alone, without having to go through Congress. For the last three, Obama needs to be much more specific and forceful than he was in his speech yesterday. The message ought to be, if Congress does not act on jobs, it - not he - will be held responsible for continued high unemployment in 2012. If you can't get the legislation, take the issue.