The key was really what the banks would do with excess reserves. If regulators and the Fed had followed Krugman type advice, they would have encouraged or pushe

The key was really what the banks would do with excess reserves. If regulators and the Fed had followed Krugman type advice, they would have encouraged or pushed the banks to increase lending again on those massive reserves. Instead they encouraged the banks to sit on the reserves and so that they could pass extreme 'stress tests.' The current situation is like a permanent stress test combined with the already passed COVID relief bills encouraging aggressive lending. So they are basically following the dovish nostrum and we are getting the consequences that were warned about. It's a bit of a red herring to say that the stalled super-spending bills will push inflation off a cliff. That gun has already been fired. You would have to roll back the banking stuff in the emergency relief bills and raise rates to, uh, stuff the bullet back in the gun. The super-spending bills won't pass, but honestly both parties have an interest in obscuring their collective responsibility for the runaway inflation. Another thing that isn't mentioned much outside of FX circles is that the USD is sharply down versus the Yuan. Typically China has been criticized for enthusiastically printing Yuan to improve their export competitiveness. Instead we have record imports from China combined with a substantially more expensive Yuan.