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RE: Another thought experiment: A decentralized and utilitarian approach to SBD interest rate discovery
If SBD prices rise, no one really seems to mind.
The people that are supposed to mind are people using SBDs to trade for goods and services. If you're offering some digital good for 5 SBDs because you (and your customers) think they're worth about 5 USD but the price of SBDs goes too high then your customers don't want to pay your high prices. But also, if you've been collecting SBDs for the goods and services you offer then you can sell some of your SBDs which will tend to lower the price. So an equilibrium might keep the prices moving toward the intended target. But that economy doesn't exist, we're stuck in the world where the primary use of crypto coins is speculation or trading for other crypto coins.
I agree on both points. I'd like to see the SBD recover its peg and have the value appreciation happen on the STEEM side, but I suspect that's an unpopular opinion, so this algorithm focuses on the latter and makes no attempt to adjust the former.