(..)If interest rose to where it should actually be, somewhere between 4.5 and 6%, wouldn't our debt bomb explode? is inevitable.
That is the sole reason, why they will not be able to control the inflation, when it (inevitably) comes due to all this money printing around, using their traditional textbook measure - "rise the interest rates". That would make interest payments on already monstrous debt prohibitively expensive, so even increasing taxes, implementing austerity measures and what nots, will not make up for the rise of the mighty percentages!
Good point about keeping REAL interest rates negative - by printing just enough, to deflate money, and balance it with corresponding interest rates, so they will eventually stay in the negative REAL gains, for savers. The problem is, the days are long gone, when the savers were the dynamo behind investments... Today it is a printing press, and the money supply expands so fast, there's no way that savings could keep up with it. So even transferring all the wealth from the remaining savers, will not provide enough money, to keep the monetary bubble inflated, IMHO. Don't have the exact figures, but it is quite obvious. So, we are "investing" more&more PRINTED, not earned/dug out of the ground/manufactured/serviced wealth. If it could ever work, Zimbabwe would be the richest country on Earth today, I suppose.
There is a reason, why there are no savers, only spenders/borrowers in America/Europe (and all other developed nations), statistically, and some Game Theory is to support it (1. statistically, people behave as they were rationally calculating their decisions, 2. oftentimes, when every player plays for his best individual gain, the whole system tips to the point, where each and every player looses). IMHO, it is not exactly, that people became so reckless. It is first, their real costs of living have increased to the point where it is very difficult for them to make any significant savings (oh the joys of dollar printing and government subsidies & regulations), and secondly (and for me - more importantly), when you do some math, you will inevitably come to a conclusion, that saving money makes no financial sense, but borrowing and/or investing immediately, does. Even consuming immediately, makes more sense, than saving to consume tomorrow - because your savings are loosing purchasing power all the time, even when you sleep!
That was my conclusion, after I finished the college, and started asking myself this kind of questions - interest on my savings was always lower, than even the OFFICIAL inflation figures. Hell, I thought, something smelly there, but saving money definitely doesn't make too much sense, if you have even the very basic understanding of the simple math :redherring: