2. Historically, the Federal Reserve has failed to subsequently tighten monetary stimulus
I think a Keynesian idea that lies at the heart of Federal Reserve philosophy is that during economic recessions you offer monetary stimulus to support virtuous (re-)investment cycles, and during boom years you tighten market access to funds to prevent debt-fuelled excesses.
I would be really interested in reading somebody more qualified than me revising this point after the two years (or, this post more generally). It seems than right now, the economy and the financial system are closer to a third mode than they have been in decades (?): in 2024 in the US, we could see relatively low GDP growth and sustained relatively high interest rate if the Fed decides that lowering the rate prematurely could spike the inflation again.
However, this still pretty mild and benign in the US ,whereas the UK faces a real risk of downright stagflation, especially if the Labour party wins the next elections, which currently seems almost certain.
I would be really interested in reading somebody more qualified than me revising this point after the two years (or, this post more generally). It seems than right now, the economy and the financial system are closer to a third mode than they have been in decades (?): in 2024 in the US, we could see relatively low GDP growth and sustained relatively high interest rate if the Fed decides that lowering the rate prematurely could spike the inflation again.
However, this still pretty mild and benign in the US ,whereas the UK faces a real risk of downright stagflation, especially if the Labour party wins the next elections, which currently seems almost certain.