It implies stagnant real incomes, thus limiting welfare gains and complicating the management of the debt overhang for firms and households. It is accompanied by high levels of structural unemployment, which is both socially very costly and creates a drag on aggregate demand. And it reduces the amount of stimulus that monetary policy can provide to the economy without generating inflation.
Once again, the repricing appears to reflect concern over what could happen, as much as what is considered most likely to happen. One way to illustrate this is by examining the survey-based expectations of primary dealers in the US money market.