Why can’t they “normalize” . . . what does it mean?

After the Crazy Crash (Dow down 20% in one day) of 1987 the Fed lowered interest rates to keep the economy from collapsing. They again lowered rates in the wake of the S&L crisis (1990), the Y2K scare (2000), the bursting of the Tech Bubble (2002), and the Great Recession (2008). The latter downturn was so severe that: (a) the Fed also instituted “Quantitative Easing” where they bought bonds, ballooning their balance sheet from $1 trillion to $4 trillion; and (b) the treasury started to run deficits double and triple the prior norm of around $300 billion annually.

The recovery from the Great Recession was slow and tepid, but as GDP and employment expanded there was an expectation that eventually the Fed would normalize and the deficits would shrink.

Not.

Rather than normalizing their balance sheet back down to $1 trillion it has soared to $7 trillion. Rather than interest rates climbing back from 2% into a normal range of 4%-6%, the rates have sunk further to an unprecedented 0.8%. And rather than reduction of the deficit back to $300 billion or $400 billion, it now stands at $3 trillion.

Normalization has been a goal for almost ten years. The realization of that goal is nowhere in sight. How long will these almost unbelievable interest rates and deficits last? Why do they seem to be required now to buoy the economy? What’s going on?