At this point, there are several reasons why it seems impossible that interest rates could ever go up to a more normal level. To begin with, the banking industry, consumers, the financial markets and the economy as a whole is extremely fragile, leveraged and addicted to ultra-cheap money. Secondly, the Federal Reserve and federal government is very concerned about the effect that lower housing prices might have on the economy and tax revenues. For those reasons alone, I think the Fed will do whatever it can to keep interest rates down, via its management of the interest rates it controls and the coercion of the longer-term interest rates that it does not directly control.
However, my personal opinion is that one reason remains foremost behind the efforts to artificially control interest rates: government debt.
Everyone pretty much knows that the federal has been growing for the last few decades with especially rapid increases in debt over the past decade. According to the Federal Treasury, total debt outstanding, including "intragovernmental" debt (debt between government agencies, e.g., with the Social Security Administration), has risen from about $300 billion in 1970, surpassing $1 trillion in 1981, $10 trillion in late 2008 and now surpassing $17 trillion (see chart below).
Of today's $17 trillion in debts, about $12 trillion is in "marketable" securities, such T-bonds, bills, and savings bonds. Those debts require the government (and its taxpayers) to pay interest on those debts. What we will see is that even as outstanding debt has greatly increased, the interest payments on that debt has, thus far, been quite stable. And this, as the Federal Reserve, Treasury and White House are well aware, is because interest rates have been kept so low, especially over the last decade. The graph below compares the accumulation of government debt over the last 13 years with interest rates and interest payments.
In this graph the rising red line shows total debt outstanding and the (mostly) falling pink line represents the average interest rate paid on outstanding government debt. But notice how the blue line is quite stable over this period, hovering close to the line around the number 4. That number 4 represents $400 billion in yearly interest payments. That sounds like a lot, and it is a lot, but those interest payments would have been a lot higher if not for the generally falling interest rates over the period. For example, if today's interest payments were based on the more than 6% interest rate existing in 2000, then 2013's interest payments would be closer to a trillion than the $400 billion level that has existed for the last 13 years.
If interest rates were to rise the government's finances would be in a worse mess than they already are. In fact, just a 2% rise in the interest rates it pays on its debt would mean more than $200 billion in additional yearly interest payments. That fact makes the Congressional wrangling over the budget rather silly as they argue over a few tens of billions of dollars. In the future, the interest rates the government pays on its debts will have an increasingly important influence on the government's spending demands. Imagine if the government had to pay a 6% interest rate on $25 trillion of debt (unfortunately, that level of debt is coming all too soon). That would be $1.5 trillion in yearly interest payments alone. That's more than the total amount the government currently collects in income taxes every year. If interest rates went even higher, debt interest payments would quickly make the government insolvent and the only recourse would be massive inflation or outright debt default.
Without the government exerting its power over interest rates, the increasingly risky government finances would result in higher interest rates. That is the basic risk-return tradeoff that governs economics – higher risk (more government debt), means a higher return (or interest rate) that will be demanded from bondholders. But since the government directly controls short term interest rates and exerts powerful influence on the financial industry as a whole, the government will continue to do whatever is in its power to limit the interest rates and the interest it pays on its debt. No matter how high inflation becomes the government will obfuscate its seriousness and attempt to keep interest rates as low as possible for as long as possible. Excepting a massive cut (perhaps 30%) in government spending, there will be no other way out for the government to manage the interest on its debt.