I wonder if we can/will get there with the interest rates too. Obviously they need to go much higher to really rein in inflation. But that will skyrocket the deficit as federal interest payments to cover its debts go through the roof. The government _can’t_ tolerate the kind of interest rates we had forty years ago. But if we don’t get those interest rates, what tames inflation?
It may not happen this cycle. We might pull out of our nosedive and tell us everything is OK. But I figure at best we’ll have on more economic cycle before this happens again, and the inability to sustain high interest rates leads a crisis where inflation spins out of control and we get hyperinflation.
(That’s one reason I refuse to sell my bitcoin despite the overwhelming negativity lately - it’s dollars that are in a critical condition sometime fairly soon, not BTC.)
Personally I think raising interest rates misses the mark. It’s more a supply/demand issue and yes, easy money policy makes it easier for the demand side. But the problem has been supply. I don’t think it is “too much money chasing too limited supply” but rather just “too limited supply”. Sure, demand has increased now that we’re out of the lockdowns but ending the lockdowns hasn’t improved the supply problems.
And frankly I think China’s “zero covid” policy is part of a low-grade economic war they are waging, restricting supply and hiding the reason by claiming it’s health policy.