The financial system limit brings with it a political system limit. Politicians need to understand that there are no magic answers, no policy tools that can solve the dilemma of ‘stimulate and add to stagnation in a decade, versus do not stimulate and risk immediate stagnation,’ which is explained in the book, see www.sparklingbooks.com/fsl.html.
What led politicians to make our debt problems worse? Economics originated as a social and political discipline but has somehow lost its way buried in the detail of microeconomics. The old formula of ‘stimulate your way out of recession’ worked when debt levels were much lower, nowhere near the feasible limits, and therefore credit could expand without anyone considering the consequences. As noted, for a period that ended nearly forty years ago, that expansion caused negative real interest rates. Now, after seventy-five years of the post-war consensus, in which every recession has been neutered by economic stimulus, the economic cycle driven by central banks keeps bumping up against the financial system limit.
Central banks are now the victim of their past policies. The Fed, and other central banks, need to keep on stimulating so that more credit can pay for the cost of borrowing resulting from previous debt creation. The alternative is to crash the economy, which nobody wants. The financial system limit and political system limit are interlinked.