Atif Mian and Amir Sufi write,

when the wealthy save in the financial system, some of that saving ends up in the hands of lower wealth households when they get a mortgage or auto loan. But when lower wealth households get financing, it is almost always done through debt contracts. This introduces some potential problems. Debt fuels asset booms when the economy is expanding, and debt contracts force the borrower to bear the losses of a decline in economic activity.

Pointer from Mark Thoma.

So the wealthy lend to the non-wealthy, who use the loans to consume. At some point, this process becomes unsustainable, and bad things happen.

Why don’t the people who manage wealth for the rich folks try to find better investments? According to the secular stagnation story, there are no better investments. However, one can tell an Austrian story in which the consumption loans constitute malinvestment. I would argue that this malinvestment is not caused by the Fed keeping interest rates to low. It is caused by government credit-allocation policies, embedded in various bank regulations.

In a Keynesian story, in which the wealthy have excess saving that cannot find a good use, more government spending is the solution. In the more Austrian story of malinvestment, steering more saving toward government and away from private investment would be part of the problem, not part of the solution.