Here is a [link] to the testimony to the Financial services Committee by Dr. Josh Bivens that summarizes the current financial crisis and the role of monetary policy. The language is clear and concise, though the view is in favor of the Federal Reserve.
The testimony seems to favor debt monetization due to the current economic environment. However, politically, I wonder whether it is ever feasible.
“If, for example, Congress acted to provide a new, significant round of effective fiscal support to the economy, the Fed could act to enhance the effectiveness of this support as well as keeping it from adding to the national debt held by the public by simply buying the new debt issues and holding them on its balance sheet.”
“This action should ameliorate the concerns of those worried that more fiscal support to the economy would lead to high debt burdens for the U.S. government in the future – if the Fed owns the newly-created debt that that provides fiscal support, interest on this debt would be paid to the Fed and recycled back to the U.S. Treasury. This is not a strategy that can be continued when the economy is near full-employment – it would surely lead to inflation. But there is no danger of that happening today, with vast numbers of unused resources available to match new production to new money creation.”
Source: “Can Monetary Policy Really Create Jobs?” [Financial Services Committee]