I think they felt forced to do it

There has been a lot of chastisement of the Federal Reserve for its recent hyper-stimulatory policies. Those policies resulted in over-valuation of financial and real estate assets, exacerbation of inequality, and market distortions.

But for decades what they faced was pressure on the one side and an absence of deterrence on the other side.

The one side: Since the crash of the tech bubble in 2000 the system has suffered from low growth rates, high debt levels, and potential future crises in regard to unfunded liabilities (like: obligated pension and entitlement program payouts).

The other side: Low inflation.

Inflation was actually too low, around 1%, for years. The Fed desired 2% inflation in order to ease over-indebtedness.

Critics screamed that hyper-stimulation was resulting in market distortions. But the Fed might have had in mind: Facing problematic conditions our policies are having the salutary effects of slowly raising the level of inflation while at the same time increasing growth rates, asset valuations, bank and corporate reserves, pension fund savings, and the availability of affordable mortgages.

The critics said the market distortions would lead to financial calamity. The Fed seems to have bet that the high levels of employment and wealth reserves it could induce during the period of economic expansion would provide a cushion during a period of contraction. Well, we’ve entered the latter and now we’ll see who was right.

An underlying factor is that the whole system seems increasingly inclined toward stagnation. A revival of Fed monetary stimulation could just lead to stagflation rather than to growth.