It’s actually the poor and lower middle classes whose wealth — such as it is –lies fallow in no-interest bank accounts (or wealth-eroding cash if they have no bank account at all). It’s not the rich, but middle-class retirees that try to eke out a living on low-yield interest rates.
He is arguing against Paul Krugman, who claimed that low interest rates hurt the rich, who otherwise enjoy clipping bond coupons.
I think it would be wise for economists to refrain from making claims about broad classes of people gaining or losing from low interest rates. Interest rates are an endogenous variable. At best, you can talk about who benefits from whatever exogenous event created low interest rates. Even then, general equilibrium analysis of that sort is rather difficult.
Maybe you want to talk about who benefits from the Fed’s policies. That is a proper question. In my view, the only clear beneficiaries are shareholders and managers of large banks.
Yeah, that’s a dangerous generalization to make. “Cheap money is a transfer payment to the rich. It is a tax on the poor.” Not if you’re trying to scrape together a car or mortgage payment every month. Cheap money is a blessing. The thing about being poor is you don’t have a bunch of money sitting in a savings account somewhere. You don’t a bunch of money anywhere! That’s what it means to be poor! You’re not losing out on much when interest rates are low because don’t have much money to lend, anyway.
And asset holders generally. Yes, the poor and middle class have at most working capital and store what little wealth they have in goods, not cash. Those who insist on holding cash feel they have to invent these stories to persuade others they are not just talking about their own self interest rather than reducing their holding preferences which is what they would do if they really believed it.
The Fed also benefits the politicians whose campaigns are financed by said bank managers and bank shareholders.
“The Fed’s policies”? Compared with what alternative(s)?