Mr Bernanke dispenses with many of the criticisms of low rates with which Mr Chancellor is taken; what his account lacks in vivacity it makes up for with analytical clarity.For example, he gives short shrift to the idea that loose monetary policy prolongs the lives of “zombie companies” whose capital would otherwise be reallocated to more productive endeavours.If interest rates are low because desired saving exceeds available lucrative investment opportunities, then of course capital will flow to less profitable ventures instead.Low rates do not tie up capital, but make things easier for entrepreneurs who wish to borrow.Such an argument might not have the lustre of references to intellectuals such as David Hume or Frédéric Bastiat, but it is coherent.By contrast, “The Price of Time” reads like a jumbled collection of every criticism to have been levied at low interest rates.Mr Chancellor argues that low rates benefit financial interests, then laments that they damage bank profits.He says low rates hurt retirees by making annuities unaffordable, but also that they benefit the elderly at the expense of the young by pushing up property prices.It is not always clear whether he thinks low rates lead to too little investment, too much investment or investment in the wrong sorts of things.Messrs Chancellor and Bernanke do agree that low rates increase financial risk-taking, for reasons that economists do not fully understand.
