The financial system limit causes a political system limit. Politicians need to understand that there are no simple answers, no policy levers that can solve the dilemma of ‘stimulate and add to stagnation in about ten years, versus do not stimulate and risk immediate stagnation,’ which is discussed 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 science but has somehow lost its way buried in the detail of microeconomics. The old formula of ‘stimulate your way out of recession’ was fine when debt levels were much lower, nowhere near the feasible limits, and therefore money could expand without anyone worrying about 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 resolved by economic stimulus, the economic cycle driven by central banks keeps bumping up against the financial system limit.
Central banks are now cornered by 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.