"They still have the weapon of raising interest rates significantly to ward the inevitable rise of PMs off."
That isn't quite true anymore - especially in the USA, where they can NEVER increase interest rates because the interest on the National Debt($16 Trillion) would be more than the Government's income($2.4Trillion).
If they just let interest rates rise, they could easily jump back to the 15 -20% like we saw in the eighties.
