The Hidden Bank Time Bomb: Interest Rate Risk « naked capitalism:
Yves Smith explains the problem of too low for too long: interest rate risk and zombification.
Basically, once the monetary system has hit the zero-bound on interest rates, there's no where to go, but up. And, if policy is to maintain rates near the zero-bound for a long time, combined with a policy of low inflation, the effect is to push financial institutions to load up on long-term debt, which carries a lot interest-rate risk. Any rise in nominal interest rates -- any rise in inflation in other words -- will carry with it an increasing risk of destroying the capital of financial intermediaries, destabilizing the financial system. And, that risk is increasing, as long as the central bank is maintaining a low policy rate environment.