Paul Krugman makes an important point that would have been understood in the late nineteenth century, but not so much today: there’s a distinct group of wealthy and influential people that benefit personally from high interest rates even as they crush economic growth:
[E]asy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent….
Complaints about low interest rates are usually framed in terms of the harm being done to retired Americans living on the interest from their CDs. But the interest receipts of older Americans go mainly to a small and relatively affluent minority. In 2012, the average older American with interest income received more than $3,000, but half the group received $255 or less. The really big losers from low interest rates are the truly wealthy — not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.
That’s a pretty intense lobby for keeping interest rates as high as possible, and it matters even if tight-money policies are invariably rationalized as necessary to head off Weimar-level inflation and/or to reassert national righteousness.
