Thanks for your take, and two great articles on the bond vigilantes and taking away fiscal support in a slump.
Related to the notion of ultimate central bank control over interest rates, there had been a lot of talk earlier in the year about "yield curve control" (mentioned in one of the articles you attached). It was seen to an extent in Australia. Given the current debt levels globally, I'd honestly expect that if they felt rates were getting too high, then whatever central bank would just do that again.
As a side note, I read a book by Ray Dalio where he was pointing out that economic recovery had slowed during the 1930s whenever the US government withdrew fiscal support. And resumed when they reinstated fiscal support. Interest rates were low while that was going on, a bit similar to now.
Lyn Alden pointed out the same about GDP growth resuming despite high fiscal debt after WW2. There was also decent inflation.
I wonder how high inflation will get this time, as one thing I notice is that post WW2 there were a lot of jobs in the US and Britain to enable inflation, whereas now those jobs aren't there in the West to the same extent due to globalisation. Because of that (in part) I expect that inflation would not get as high this time around because the wage growth element won't be there to the same extent.
My take is that I'm expecting that rates will stay within a central bank determined range, and that inflation will be largely dependent on the extent of fiscal support because globalisation (amongst other things) tends to have a deflationary effect. The fiscal support will offset that but not much more.
Also re the IS-LM model, it's interesting that it predicted no inflation with monetary stimulus. It is a useful model to give a decent indication.
