Nothing ever happens instantly. There are delays. Securitization was already toppling before the real estate crash really happened. And real estate was recovering in some areas before commercial lending recovered, much less securitization. Etc.
Delays in economics are Normal. Knowing the probable length of a delay turns out to be super valuable, if other people do not (actually, it can be worth knowing even if too many people know to take advantage of it, because you can at least be less foolish). Delays in the intersection of politics and economics are super unpredictable. See Bill Ackman. If anyone _could_ get good at predicting delays at the intersection of politics and economics, they would never need to worry about having enough money for whatever they wanted to do, for ever and ever. Predicting what the Fed is going to do with rates is a perfect example of predicting a delay at the intersection of politics and economics.
But before digging into that, I want to revisit the inflation (including hyper inflation) fears of a few years ago. Inflation happens (over simplification) when you have too many people chasing too few goods. Inflation contributed to the crash when increasing demand for fuel in the developing world (China making crap for us) combined with increasing demand for fuel in the developed world (drive till you qualify in an SUV) and met up with not-increasing-fast-enough supply. The oil spike messed up household balance sheets (among other things) and that disrupted the perpetual money machine and BOOOM. But the developing world experienced a delay in demand for the crap they were selling us (and their political regimes were pushing them anyway -- and discouraging domestic demand from taking up the slack), so their demand for commodities continues. For a while.
The combination of a horrifyingly bad and international financial crash and liquidity crunch with continuing high demand for a variety of commodities and the apparent health of BRIC nations led some people to believe that inflation (including hyper inflation) was next. Right when everything around them indicated deflation was rampant.
A little side light here: hyper inflation only occurs when people distrust their own currency and swap it for a different currency. Which obvs wasn't going to happen with either the euro or the dollar or the yen or whatever. History and theory agree on this; I still don't understand how people got confused about this but whatever.
Where was I? Oh, yeah. It should have been obvious (was to me at the time -- I had excruciatingly painful, long arguments with people about exactly this topic, trying to understand why they were so convinced inflation was in the offing) that the global demand for commodities was going to drop after some delay. Once producer countries figured out that they couldn't sell stuff to consumer countries, they weren't going to keep churning it out so fast, and they wouldn't be buying oil so fast, etc. In the meantime, everyone in developed nations was figuring out bus and train schedules, buying a bike (okay, the hyper inflation people were buying guns), moving in with their mom, moving closer to their job, driving the best gas mileage car in the household to work, car pooling, buying a commuter car, etc. Voila. Demand for all kinds of stuff drops. And eventually, _that_ delay gets worked through and the prices on commodities drop. (Altho not until every single fucking place to park oil and wait for the price to recover was full of that tarry black goodness.)
I do not think that anyone would disagree with the proposition that if you offer money at zero interest, long term, to all comers, and there _are_ people willing to borrow that you are willing to lend to, you will eventually generate some inflation. There is essentially ONE reason for the Fed to raise rates: inflation is (about to) occur(ing). But there is ANOTHER reason why a lot of people would like the Fed to raise rates: because they hold ultra-safe, cash like debt instruments, and they want some return. If you are too skeered to buy anything (other than pay down your own debt), or invest in anything (like, say, a stock), then you hold cash and cash like debt instruments, but you want some income, because you don't want to have to "spend your principal". The Fed appears, in your mind, to be what is getting in the way of the juicy income stream you believe you deserve, because, hey, everybody got it before you.
IF THERE ACTUALLY WAS INFLATION, people wouldn't sit in cash and cash like debt instruments, because it would be easy to find something that offered a better return -- and the rapid decrease in the value of their pile of money would be apparent. And then the Fed would raise rates.
But as long as a huge fraction of the money people are holding is sitting in their checking account, that's a fair indication that people don't perceive the money sitting in their checking account as losing value very quickly. That is, inflation is no concern of theirs.
And thus, inflation is no concern of the Fed's, either. NO rate raise for you, people sitting and quaking in fear in your ultra safe debt instruments. You'll get a rate raise _after_ you realize you're better off in an index fund because the market is going CRAZY and you finally feel like you need to get in on that action before you miss out entirely, like every other time this has happened.
ETA: There's a much simpler way to think about when the Fed will raise rates. They'll raise rates when they have to, in order to convince people to want to buy our national debt. Lots of people kept believing this was gonna happen any day now. For years. While demand for that debt just kept growin' and growin'.