I'm more likely to use $1 million from current earnings to build that factory than I am to borrow, and I'm more likely to only borrow in such an environment if I expect a higher than 3% return. The result is that savings are more carefully (and productively) allocated.
I don't share your assumption inducing the squandering of savings on increasingly marginal projects is in the best interest of wealth creation.
Are you less likely to borrow to fund consumption when your borrowing costs increase 3% each year? Are you more likely to save when your purchasing power increases 3% each year? What builds wealth, savings, or consumption?
LOL! That's not the question.
I'm more likely to only borrow in such an environment if I expect a higher than 3% return.
How high would your return have to be?
Are you less likely to borrow to fund consumption when your borrowing costs increase 3% each year?
I'm less likely to borrow to fund anything. Like new investment in manufacturing plants.
Are you more likely to save when your purchasing power increases 3% each year?
I am less likely to purchase. What happens to productively allocated savings when demand collapses? What happens to employment?