When the central banks began printing money, they bought loans, which is equivalent to an increase in the supply of loans. The price of a loan (interest rates) decreased. Low interest rates benefit borrowers, and hurt lenders:
- From 2007 to 2012, governments in the eurozone, the United Kingdom, and the United States collectively benefited by $1.6 trillion both through reduced debt-service costs and increased profits remitted from central banks (exhibit).
- Nonfinancial corporations—large borrowers such as governments—benefited by $710 billion as the interest rates on debt fell.
- Although ultra-low interest rates boosted corporate profits in the United Kingdom and the United States by 5 percent in 2012, this has not translated into higher investment, possibly as a result of uncertainty about the strength of the economic recovery, as well as tighter lending standards.
- Meanwhile, households in these countries together lost $630 billion in net interest income, although the impact varies across groups. Younger households that are net borrowers have benefited, while older households with significant interest-bearing assets have lost income.