The savings rate was zero last summer just before the biggest wave of the financial crisis hit. The savings rate is 7% of income today. A trillion dollars a year in net new savings have been created out of income, in less than a year's time. Despite short rates at zero.
It was sufficient to cut off the deadbeats borrowing what they could never pay back. They were dis-saving and consuming the savings of the rest of us. Now they are not.
The savings rates might still need to go a few percent higher, to 10% or so. Or it might drop back to 5% on recovery. But it is a self adjusting system and it is emphatically not going downward.
The Fed is setting rates correctly to maintain the exchange value of money broadly stable. If they had left short rates at 5%, the price level would have fallen 20-40%, just as house and commodity prices have. That would have doubled the weight of all existing debts - without benefiting creditors incidentally, because those debts would simply have defaulted as a result.
The stock market is going up because the corporate bond market has been healed from the panic of last fall. As a result, companies can borrow again. Companies have also cut their costs enough to break even at much lower levels of sales than a year ago, and that necessary adjustment is now basically complete. This is exactly what free economies do in response to new sets of prices; they adapt.
The 1920s were a binge time. It took until the late 1980s for the USA to reach that level of conspicuous consumption that is the hallmark of a spending boom. I think the party is over and people are going to be living very frugal lives for decades. So... if we see growth, it might likely be lackluster. This will dampen our lifestyles as people forgo the expensive luxuries and head for McDonalds!
btt