I am still puzzled why you think inflation cannot be achieved.
If I understand you correctly, you think that the Federal Reserve’s purchases of US Treasuries will lead to a meltdown in the bond market, because it will lead to China pulling back from the US Treasury market.
Let’s follow that logic. China holds less than $1 trillion of US Treasuries. Sure, China could roil the Treasury market by threatening to sell some. They could go further and actually sell a chunk. But let’s consider a worst case scenario, and assume that China sells all its US Treasury holdings now. Does the US govt have the instruments to prevent a spike in US Treasury yields? Sure. The Federal Reserve can simply buy all the additional Treasuries on the market at a high enough price to keep the yield at today’s levels.
Will everyone be happy with that? Not everyone, but the Fed can certainly do it. It will lead to a quick devaluation in the dollar. But that just adds more import price inflation to the sum of inflationary pressures.
That’s an extreme reaction (US govt) to an extreme action (Chinese govt). In reality all the govts are more careful than that, so we are more likely to see carefully managed gradual movements spread over years.
