Confidence in the Peg is what makes this whole system work. The more confident MakerDao participants are in the Peg the more action they are willing to take in and around the system. A persistent $1.02 Dai price does not inspire confidence. In fact, the reason the Dai price has been $1.02 for so long is due to a lack of confidence in the Peg and governance around it. The market participants (myself included) are unwilling to take the risk to lock collateral up in vaults right now and issue Dai to sell because we are afraid that governance will not take the necessary steps to correct the Peg in the markets.
We are currently proving them right. The markets allow participants to partake in arbitrage at any price higher or lower than a range of about $.9975 - $1.025 and still have profits. however, this is only if the market believes that the MKR governance is going to steer the Dai price, through its actions, back to where it belongs in a reasonably short time. We need to take action to restore confidence by steering the Peg back to $1.00 immediately.
Picture MakerDao confidence like a sailboat and the market participants are the sails. If we do not provide the wind, MakerDao will struggle to get anywhere as an organization. If however, we show that we will provide lots of wind. The sails will open up and we will be off at great speeds with high Peg confidence the way the system was DESIGNED. We should have rates at 0% right now or perhaps even a cost to holding Dai until the Peg is where it needs to be. We should always be correcting the Peg that is how you build confidence and that is how you get the Peg to correct itself over time.
If Peg is over $1.00 make holding Dai hard and creating Dai easy (and safe for the arbitrageurs to do). If Peg is under $1.00 make holding Dai easy and creating Dai hard. If we do this we will have success. Peg confidence is the #1 goal of the Dao. Lets get it handled.