Now indulge me in a thought experiment - something that didn’t actually happen in Austen’s England, but could have. There may have been some prestige associated with owning land and (maybe) some patriotism involved in buying public debt, but canny businessmen surely compared the rents or interest they could get by buying land or bonds with the profits they could expect to earn by building factories. So what determined the interest rate on British bonds and the price of British land? The answer has to be that both depended on the returns from capital investment. Tellingly, “Pride and Prejudice” doesn’t tell us the value of either man’s estate the income was the thing. Bingley had 4,000 pounds a year the estimable Mr. And the income from land was stable enough that it provided a quick measure of a man’s status. This rent, as David Ricardo explained in 1817, was determined by the interaction of the population with the supply of fertile land. So: Early-19th-century England was an extremely unequal society that was still largely dominated by landowners, who lived off the rent paid by their tenants. I’ll explain later how the sense and sensibility we gain from Austen translates in the 21st century. And one way to illustrate why is to think about an economy simpler than the one we have now - the economy of Jane Austen’s England. Well, I want to take on the latter argument, which is fundamentally misguided. And this, the critics claim, widens inequality. On the left, the complaint is that low rates push up the prices of stocks and other assets that are mainly owned by the rich. On the right, the main complaint seems to be that savers aren’t getting the returns they deserve - although it’s not clear why savers deserve high returns in a world that seems to have more savings than it knows what to do with. But there has long been bitter criticism of low rates, coming from both the right and the left. This isn’t an arbitrary policy: Central banks believe that they need to keep rates low to avoid sliding into recession.
The Federal Reserve and its counterparts abroad slashed interest rates in the face of the 2008 financial crisis and have kept them very low - in some cases below zero - ever since.