We live in a finance based economy. High interest rates would wreak havoc on the economy. What would happen to home prices if mortgage rates were 7%? What would happen to commercial properties if commercial mortgage rates were closer to 10%? What would happen to corporations if they had to roll debt at those rates?
We have already seen a run up in commodity prices and many goods coming from China in a weak economy. What would happen if the economy gains some steam? The Fed and other central banks are walking a tightrope. QE and easy money are not a win-win. There are dangers to it and we might soon find out what lies on the other side. I do not claim to know what will happen as the events of the past few years are truly unprecedented. But neither do the pundits on TV claiming the S&P 500 will be up precisely 12.7% next year. There are risks.