Bad investment compared to what? Idle excess fiat is worth about -100% to the aggregate economy over the time it is kept idle. Manipulating it so that it stores value for an individual at a real rate of -2% when private market stores of value's risk adjusted real returns are lower than that is a market distortion that transforms people's savings into a huge loss to the economy.

I am the one being meticulous about the implications of real vs nominal. In particular I am saying that people's saving should be tied to something real by making sure they end up in something backed by real economic activity like stocks, bonds, actual stuff or credible promises of production of actual stuff.

You on the other hand don't seem to see the different implications between fiat stores of value and real value tied to production and production capacity. You have no problem if people's savings end up as purely nominal idle fiat without any real intrinsic value tied to them, if people's savings accumulate as pure government created claims on production from other people who have not promised to fulfill those claims.

I like to make simplified agrarian economy metaphors:

Say you had an isolated farming village where people wanted to save to be able to eat in the winter. It is important that farmers invest their profits into additional production to have something to eat in the winter, even if, because of perdition, the stored crops are only worth 90% of the initial investment required to produce them.

Otherwise, if they instead mandate their government to create a currency that keeps 98% if its real value when other forms of savings available don't, most farmers are going to work, trade part of the crop they don't want to eat to diversify their diet and keep their cash profits to be able to buy something to eat in the winter. They will not produce a crop to store for the winter since it would only return -10% and their central banks promised to keep money at -2% real value.

However, now comes winter and all farmers have cash but few have anything to sell because they didn't reinvest their cash in the production of a stored crop for the winter!

It's going to be difficult for the government to control inflation in such conditions because there will be too few goods for the amount of money people will want to spend. If the government manages to control inflation it will be by depressing the nominal value of the crops of the few farmers who did invest and save a crop for the winter. The central bank might do this by giving high enough interests payment on cash to prevent people from wanting to spend it immediately. In any case, people won't eat much during the winter.

This could all have been prevented if the central bank had kept money devaluating sufficiently and farmers would not have kept their savings as cash but would have reinvested them into an extra crop for the winter and have continued to trade during the winter.

What you call allowing "malinvestment", I call allowing sufficient production or production capacity to fill the needs of the future even if the returns are quite negative on this production.

Note that there are parallels with farmers saving for the winter and a baby boom saving in preparation for retiring and stopping to work.