Nick Rowe says some of the answers to Paul Krugman's question - why do some of the 1% want to raise interest rates? - are daft conspiracy theories. I'm in two minds here.

Let's start by sharpening Krugman's puzzle. Since the mid-80s, the income share of the 1% has risen at the same time as real interest rates have fallen. This tells us that low rates are compatible with the 1% doing well. And there are good reasons why this might be so. Easy money is good for asset prices, and low rates allow banks to borrow cheaply, to the benefit of senior bankers.

Hence the force of the question: why do some of the 1% want higher rates?

One big reason is an empirical claim - that a small rate rise now would nip inflation in the bud and so prevent bigger rises later. In this way, a rate rise now is consistent with low rates over the long-term. This "stitch in time" reason for a rate rise was expressed by Andrew Lilico of the shadow MPC, who favours (pdf) a rate rise as "a chosen small step to normalisation rather than the first forced step in a series of rapid rises."

In this sense, I sympathise with Nick. We don't need a conspiracy theory. Those who want higher rates are making a reasonable (though I think dubious) intellectual point.

However, there is a political undertow here. It's about the balance of risks. In particular, the 1% are more inflation-phobic and less unemployment-phobic than the rest of us.

I agree with Steve that the rich hate inflation not least because it creates uncertainty. (There's also the historical point that the inflationary 70s also saw the nadir of the fortunes of the 1%: this might be just coincidence, but why risk it?)

This alone creates a bias to tighten. What amplifies this bias is that the rich can tolerate mass unemployment. Nick's parallel with the 1930s is, I think, irrelevant. Back in the 30s, mass unemployment was a threat to the rich because workers could see a plausible alternative to the existing order in communism. Today, by contrast, there are no big feasible alternatives to capitalism and so unemployment is not a political danger - which means it is more tolerable.

This answers Peter's question: why has the Keynesian coalition vanished from modern politics? It's because it is no longer politically necessary. It was not Keynes who convinced capitalists of the need for full employment but Lenin.

That said, it's not necessarily in the interests of the rich to have really high unemployment, because this could weaken aggregate demand sufficiently to depress share prices and increase default risk. However, the extent to which this is the case depends upon whether growth is wage-led or profit-led: a low wage share might depress consumer spending and hence growth, but on the other hand, a high profit share might embolden capitalists to invest. Reasonable people can disagree on the extent to which this is the case and thus the extent to which unemployment is good for the 1%.

On balance, then, I sympathize with both sides. On the one hand, Nick's right to say the call for higher rates is the sort idea that people reasonably disagree about. But on the other hand, an understanding of economic policy surely requires us to ask: what is in the interests of the 1%?