[–] 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.
[–] CanIHazPhD ago
But the problem with both approaches is that there are so many cofounding factors that there is no way to tell. And there are already good explanations to why high interest rates would lead to recession (deincentivizes investment and R&D, strong dollar makes people buy foreign instead of American, etc.) so separating that from malinvestments would be quite hard too.
[–] ForTheUltimate ago (edited ago)
The 1930 to 1968 period looks bad for my theory. The overall trend form 1980-1955 suggests that raising interest rates above the previous high purges malinvestments allowing you to recover the economy at higher lows in interest rates, and thus climb overtime. Whereas if you raise interest rates at below what they were before, you don't purge enough malinvestments and so you approach the zero-bound as lower lows in interest rates are required to support a recovery weighed by increasing malinvestment.