And what happens when inflation rises and they need to control it with non-zero interest rates? Then stocks, real estate etc crash and we're back in another recession, which they try to solve with... more money and lower interest rates. We've already seen this story a few times.
Inflating away debt is fine if it is done slowly and has been done for centuries.
The extreme asset valuations we've seen after a decade of QE are unprecedented.
ZIRP and QE are not fine and are not working for the stated purpose, if anything they're making the economy more fragile. There's an interesting overview of the choices here from Lyn Alden, none are without complications but it does sound like they'll try to aim for moderate inflation and hope they can control it, but if they need to put the brakes on in a hurry the traditional methods of doing so could have extreme effects on overvalued assets:
Yeah I don't disagree with Lyn, low rates are underwriting our entire bubble ad not necc the monetary policy I'd prefer.
Rather than pushing up financial assets and then jamming everyone into more interest rate sensitive debt, why not print the money, give it to poor people, and create a bit of inflation.
Inflating away debt is fine if it is done slowly and has been done for centuries.
The extreme asset valuations we've seen after a decade of QE are unprecedented.
ZIRP and QE are not fine and are not working for the stated purpose, if anything they're making the economy more fragile. There's an interesting overview of the choices here from Lyn Alden, none are without complications but it does sound like they'll try to aim for moderate inflation and hope they can control it, but if they need to put the brakes on in a hurry the traditional methods of doing so could have extreme effects on overvalued assets:
https://www.lynalden.com/february-2021-newsletter/