Governments, large corporations and American banks have been the main beneficiaries of lower interest rates, according to a study by McKinsey Global Research. The results are shown in this chart,
To understand the chart, you have to keep in mind the meaning of the word “net”. The U.S. government had a “net” improvement in interest income in 2012 over 2007, but what that meant was that it was paying out $900 billion less in interest at the end of the period. Large corporations and governments in other countries also lowered their borrowing costs, and this constituted a “net” gain for them over the five-year period.
Banks in the U.K. and continental Europe were hurt, but U.S. banks gained because they increased the spread between their borrowing costs and the interest rates they charged.
Families with savings were hurt. Interest on my own bank account is virtually zero. Pension funds took a hit. So did insurance companies; a lot of their income comes from investing the money paid in premiums until it has to be paid out in claims.
The McKinsey analysts, unlike me, don’t think that ultra-low interest rates are driving people into the stock market. But they didn’t see any signs of increased business investment or economic activity as a result of low rates. The economy is stuck in low gear, and artificially low interest rates haven’t shifted this.