ZIRP is harming the economy

As background read:
http://www.pimco.com/EN/Insights/Pages/Life-and-Death-Proposition.aspx

Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time.

http://www.cnbc.com/id/46220487
http://gonzalolira.blogspot.com/2012/02/perniciousness-of-zirp.html

http://www.reuters.com/article/2012/02/01/us-usa-debt-refunding-idUSTRE81023720120201

"In response to clamor from investors, the Treasury said on Wednesday it was looking closely at allowing negative-yield auctions."

The only entity benefiting from 0% interest rates is the Treasury, which can keep its interest costs low.  This encourages the government to grow even larger, to replace the spending which isn't otherwise occurring.  Investors are harmed by the low interest rates.  A 2% difference in interest rates will make no difference to a borrower, who is primarily focused on how the economy will be in the future.  In addition, a lower interest rate harms the US dollar externally vs. other currencies, like the Australian dollar.  The Fed should immediately raise the Fed Funds rate to at least 2%.  Otherwise, the US economy will fall into the zombie debt-trap that Japan is in and be stuck in neutral for the next 25 years.