The late 1970’s illustrate some lessons that probably could be applied here. Authur Burns was the Fed chairman for most of the decade, 1970-1978. Inflation was rampant and wage increases lagged. It was called stagflation and it lingered for years. Nixon, Ford, and Carter all had magic bullets with funny names that supposedly would fix the problem (remember WIN (Whip Inflation Now) all five phases).
Getting back to the premise…Aurthur Burns kept interest rates relatively low for MANY years, with no success. He was succeeded by Paul Volker (A.K.A. Superman)in 1978. The first year of so of Volker’s chairmanship had pretty much the same policy as Burns’ et al. Then a funny thing happened. Mr. Volker actually bit the bullet. He raised interest rates until inflation was tamed (early 1980’s), and that was that. It wasn’t pretty but it worked. Previous posts speak eloquently to this period.
I guess the point of all this is that inflation and loose monetary policy can persist for quite a while. FWIT, my personal opinion is that the impetus for change will come from either the International Monetary Fund (IMF) or soverign wealth funds. In any case, I think a foreign body will be the driving factor. BB does not have the fortitude to go it alone.
