What was new in the expansion?

Unemployment did not rise with the deficit. The deficit was mostly a corporate tax cut.   Corporate taxes do not work well. The Fed was still collecting hefty taxes, but velocity dropping.  And baby boomer retirements.

I think this shows a VAT is more efficient then a corporate tax, unfortunately. Then we had the oil price collapse which boosted terms of trade.

So during negative shocks the rush to the dollar results in a bank taxes rising, a dampening effect on the deficit. That Bernanke was clever.  But  taxes are rising and his market opportunities for arbitrage dropping. The Fed is stuck buying longer Treasury bonds. 

So the Keynesians plot is for the prez and Congress to agree on one humongous budget for a year or two. The idea is to take advantage of the flat curve, and make it tilt properly.   But that allocated funds goes back to deposits where to avoid the Fed Vat, which is now about equal to the ten year rate. The counterparty to the government spending always can avoid a one and a half point Fed tax by leaving it on deposit.

Velocity has reached one.  The reason is the Fed is falling behind.  We are asking ti to run two ledgers, free fiat and regulated fiat; and these are either or, so we get switching.  We do not have the market size for that.  That is why the one year peaks, the Fed tax is unsustainable and the shadow system delvers. Then money sits for a long time until government bonds start retiring.

The Fed shouldn't be switching. Treasury needs to do the switching, and the Fed faces the same risk as all sectors.