I personally think that the fed now has no choice but to pump money at zero (to effectively negative) interest forever.
There's a number of reasons for this: demographics, peak oil, the massively deflationary effect of certain technologies, etc. The west really looks a lot like Japan, which has pumped cheap money since their economy went through a similar cycle of stock bubble, real estate bubble, and crash.
So expect bubble after bubble...
That being said, the existing hype is nowhere near 1999 levels. If this is a bubble, it's a mini-bubble. I lived through that time, and it was an entirely different ballgame.
The question is what happens if/when inflation gets out of hand. Raising rates causes deflationary collapse, mass unemployment, and default on government debt. Keeping them low risks crippling inflation which could lead to social instability even in the US. What's a Fed Chairman to do?
Deflationary collapse is the only path back to a sustainable model, but it's extremely painful in the short term and so nearly unthinkable that a politician would choose it unless all but forced. Are you thinking things just won't get bad enough to bring the situation to a head?
Because of things like peak oil, growing resource demand from the developing world, etc., I think it's going to look like this for the immediate/foreseeable future:
Alternating cycles of inflationary bubble economies followed by deflationary collapse. Basically think 1995-2001 in .com or 2002-2008 in real estate, over and over again, forever. Inflation, deflation, inflation, deflation...
Beneath this alternating bubble-bust economy will be an underlying trend that I've heard called in-deflation: deflation in the value of everything you own, inflation in the value of everything you use.
Food, energy, and fuel in particular have nowhere to go but up for the reasons I mentioned at the top. Things like owning a car and driving it everyday are about to get orders of magnitude more expensive.
From a social point of view, the bubbles will serve a kind of bread-and-circuses role. Everyone will get to think they're going to get rich in the Next Hot Thing.
In Australia, inflationary breakout led to the "Recession we had to have". Our Reserve Bank governor quite brutally broke the back of inflation in the late 80s to early 90s [1], culminating in an early 90s recession. With a quite conservative monetary policy we've done quite well since then.
There's a number of reasons for this: demographics, peak oil, the massively deflationary effect of certain technologies, etc. The west really looks a lot like Japan, which has pumped cheap money since their economy went through a similar cycle of stock bubble, real estate bubble, and crash.
So expect bubble after bubble...
That being said, the existing hype is nowhere near 1999 levels. If this is a bubble, it's a mini-bubble. I lived through that time, and it was an entirely different ballgame.