[–] ForTheUltimate ago (edited ago)
So, just to be clear, the 1% interest rate from around 2002 to 2004 is enough to create your magical malinvestments, but the ~0.5% from ~2009 to 2016 is not?
No, they both are enough. I predict the FED will be unable to raise interest rates to 5.25% within 30 years and hold them at that level or higher for 1 year without a recession. Atleast according to the theory.
[–] CanIHazPhD ago
Inflation is quite low right now (less than 2%) and the ecnonomy is healthy, why would they want to raise the interest rates to more than double the current level?
https://tradingeconomics.com/united-states/inflation-cpi
[–] ForTheUltimate ago
That's another question. If it stays so forever, then there's no proof or disproof.
However, if inflation rises so that the fed can either let it happen or raise interest rates, then we'll see. One theory is they'll rather let it rise than deal with recession.
Either-way my hypothesis is disprovable, it's just difficult with empiricism when the test is not controlled or repeatable. That's why I prefer rational explanations that build on micro-economics.