The former Fed Chair was a student of the Great Depression of the 1930's. He used his knowledge of that episode to form his view of what must be done to turn an economy around when in the midst of an debt crisis.
I think he missed a key part of the Keynesian puzzle.
I hear that the Great Depression of the '30s was the result of too much debt accumulated by the people. And that depression dragged on and on. It was still going on when the U.S. joined the WWII fray. And if you think about what happened when we went to war at that time in the midst of a depression we may get a clue about what gets us out of this economic/employment depression.
In WWII we sent all of the ablebodied men, and a few women, overseas in the military. They got some pay from the govt. And at home the govt. contracted with the industrialists for military hardware. But labor was in short supply at home. The women went to work. Labor was in short supply and business had big contracts to fill so labor had some power. The big companies paid good wages and even went so far as to offer medical insurance to employees. But austerity was the order of those years. Goods were rationed and people were strongly encouraged to loan their money back to the government by buying bonds.
At the end of the war people were flush with cash from the govt. spending on the war. And labor had gained traction. And labor kept the strength in the ensuing years as consumption created a booming economy and as those soldiers begat many brats.
Those brats grew up and came to take as normal the boom times that they saw. Those boom times would go on forever, they assumed. And furthermore they were told that those boom times in the economy were the result of American Capitalism, and competition is the foundation of capitalism and labor unions are the anti-thesis of competition. So they gave up their voices in the workplaces and found the joys of credit. Free capitalism and free credit. And the boom times continued....
And now the people have too much debt. They must work at any available "job" due to the shackles of their debt. They have no voice in their work. They gave that away in the name of corporate good. Technology has been used to replace many of those workers leaving those out of work to move down the labor structure until they find employment at a lower wage, displacing the less qualified, who find a bridge by the freeway for shelter and drink themselves into a stupor daily.
Thank God for Capitalism. It is the only path to prosperity. Or is it?
It seems that getting the money into the hands of the people at the bottom of the "food chain" was the key to ending the Great Depression of the '30s. And not just giving it to them, but making them work for it at the same time they gained power in their workplaces to use as the economy improved and to empower those workers to share in the fruits of productivity. In other words to USE capitalism for the good of the people, not the other way around.
In my view, the voice of organized labor is a part of not only a healthy social structure, but part of a healthy competitive economy. An economy that is not simply defined by the "beancounters", but by the sense of wellbeing of the most of the participants in the society. The "American Dream" if you will. The govt debt that is the hallmark of a Keynesian manipulation must go to the bottom of society to be effective. That is where it is spread in the most homogenous fashion and where it can most effectively stimulate the velocity of money that can lead to another round of social/credit expansion.
So, to Ms. Yellen and to Congress. Put the people to work and support them in exerting their power.