Greg Mankiw has pointed to the U.S. Fed’s “exit strategy.” It seems very Austrian!
In effect, what we have is a balancing act by the central bank. Feed it liquidity for now, even as the commercial banks “sleep.” But when they wake up because recovery has set in, withdraw that liquidity.
But what happens if the Fed withdraws too quickly? Or too slowly? We would know because in the first, we nip the recovery in the bud. In the second, we see inflation in commodity markets and real asset prices.
Can it really be done? That seems to be the “Hamlet” of the macroeconomics profession today.