The FED and mainstream economists know that if interest rates will go up it will create huge deflationary forces (on top of existing ones) so they will do everything in their power to keep them low. I doubt we will see high interests for the next few years until debt ratios go a bit lower. The FED even mentioned that they’re willing to allow inflation to run higher for a while. That being said, it’s not a given that we will see inflation.
For debt ratios to decline, people have to stop going into debt as much. Or, they pay off their existing debts instead of using that cashflow to qualify for more debt. It's hard to imagine reducing debts unless you have a shock like '08 GFC, which changed the standards for acceptable underwriting.
> For debt ratios to decline, people have to stop going into debt as much.
Low interest rates and high perceived inflation causes people to take on increasingly higher amounts of debt. In some cases, it makes sense to borrow at 3-8% interest if you expect an ROI of 12-20% and you set aside 1/3rd of your gross return for taxes.
However this system has some positive effects. If you go out and build 3 homes and people buy them, you’ve effectively created 3 homes worth of wealth.
