Please, read the article instead of commenting based solely on the title. The author specifically explores conditions when the answer is "no", namely: persistent fiscal deficits with high public debt levels.
When you issue too much debt and don't have the income to pay it back (you're running a deficit) you either pay the borrowers back less money than they are due (default) or you pay them back the same amount of money but that money is worth less (you 'inflate the debt away').
Meh. I'm thoroughly unimpressed by this article. It seems to follow a pattern of acknowledging effects of lowering rates, handwaving away the relevance of raising rates to reversing them, and then dropping a hyperbolic analogy to emotionally drive the point home. (gunshot wound! Kobayashi Maru! capital controls!)
I know it's edgy to be contrarian, arguments for restarting the VC/bankster party are going to play real well with the VC/bankster crowd and their beneficiaries (eg Surveillance Valley). And the argument dovetails right in to the political chant that government spending is too high (that magically happens whenever the President is a Democrat). But it's just utterly disingenuous to ignore all of the monetary inflation through the 00's and 10's (both lending based and the deficit from the fraudulent Iraq war), and then point to the straw breaking the camel's back (Covid supply/demand shocks plus stimulus) as the cause.
Main Street has certainly seen plenty of financial devastation on the way down as rates marched to zero, as Wall Street got handed a continual influx of cheap money. Now we're just supposed to accept that damage as inevitably permanent, and believe raising rates won't contain or even reverse the trends? I don't buy it. How about we just leave rates at the moderate [0] level that they are currently at for a decade+, so all that medium term debt can come due, and then see the results?
Right now the markets are still betting that the current existence of interest rates is just a hiccup, and on an eventual return to the ZIRP party. When housing prices have an actual correction and the everything bubble starts deleveraging, then we can start to talk about how much is enough.
[0] describing 5% interest as being "high" is basically broadcasting your limited perspective. Tell me you're still in your IPA phase without telling me you're in your IPA phase.
The actual interest rate isn't really that important: Its stability and predictability is. In practice, every loan and long term contract that is made is implicitly a bet on expected future interest rates. We could write contracts expecting a federal reserve aiming at 2% NGDP growth year to year, or we could do it at 5%, or 10%. There's an effect due to Money Illusion, but if the rate really is predictable, the difference isn't that big.
Now, when people make long term bets, like buying a house on investing in a business, and the expected inflation rate changes significantly, instead of their economic behavior being the key part of the success of the loan for both sides, it's the change in rates. We've seen banks in trouble not because 7% is too much, but because the borrowing decisions they made, expecting 2% inflation, proved to be major losers. Similar things happen in the real estate market: Ordinary borrowers are basically paying double, month-to-month, on the same house bought today than with a mortgage bought 2 years ago. So anyone that built new housing, doing the math to people buying the house for X price, is either seeing less demand, as only people that don't need a loan can afford it, or just a lower sale price, as the same salary can now pay less for a house. Either way, the builder loses on the bet, and houses either don't get built, or become less profitable.
So really, there's devastation either way when inflation or NGDP predictions are far off. And that's how the fed fails: Just not meeting targets in either direction.
It's even worse than that. The market didn't just price in low interest rates - rather it priced in continually decreasing interest rates.
But no, interest rates are not value neutral. That sounds like an invocation of efficient market fallacy. For one, interest rates form a lower bound on the amount of yield that is required for a business to be considered viable.
I am all for higher interest rates now. Higher interest rates mean my primary competitor is intentionally resigning/withdrawing and there is more room for my business idea.
