Brad DeLong, on how he would advise Obama:
"What to do? If Milton Friedman were here to advise you, he would give the same advice he gave Japan in the 1990s: Have the Federal Reserve buy bonds for cash. Have it keep buying bonds for cash until total nominal spending in the economy is on a satisfactory trajectory. Announce that it is going to keep buying bonds for cash until total nominal spending is on a satisfactory trajectory.
Milton Friedman's teacher, the ur-monetarist Jacob Viner, had a somewhat different take. Viner worried that when--as now--interest rates are very low, people have no incentive to spend their cash. And when you take bonds out of circulation you reduce the supply and further lower interest rates further. Viner sought a way to boost the money stock without pushing interest rates down further. He recommended coordinated monetary and fiscal expansion: the Federal Reserve buys bonds for cash, and the Treasury than issues bonds and spends, in order to (a) expand the money supply, (b) directly put people to work and (c) keep falling interest rates from further depressing monetary velocity and so crowding out the beneficial effects of monetary expansion."