Who benefits by higher interest rates?

A very interesting read ! Thanks for this referal. Interesting to note that such senior economist also have divergent views. 
With my limited knowledge of financial markets and common sense thought, i would go for Krugman because apart from increasing inflation with higher interest rates, a lower rate would only aid in more unemployed turning into entreprenuers. 
I am with Amit in not understanding the benefit in increasing interest rates. Even financial institutions wouldnt benefit because the number of people borrowing would drastically come down because of the high rates.

Thanks for the referral Mr.Amit.

What about the retired senior citizens who survive only on interest against their savings i.e. more interest more income to them less interest less fund availability of money which will become for them to meet two ends.

There should be no concept of interest at all.

If interest rates are raised, the loan eligibility will go down.  So for a given level of income, the quantum of loan will be less.  And the investment is mostly decided by payback period, rate of return and other financial measures.  At a higher interest rate, the investor will take only the top projects and leave out the lower return earning projects due to the credit crunch.  Now the question is "Is it beneficial?".  Yes. It is beneficial to curb the speculative tendencies.  Assume that I am getting easy loans at 0.5% interest. What I would do is, I will buy 10,0000 tonnes of wheat and hoard it.  Result - wheat scarcity (aka the onion scarcity which happened recently).  Suppose the interest rate is 10%.  I will not hoard the what since the return which I will earn will not be so attractive.

So is it wrong to say that higher interest rates will benefit the common man?  The common man, as it is, cannot get loans.  He is not affected by higher interest rates.  But the rich men will be affected and will not go into speculation.

And that is precisely what Raghuram is saying.  If there is plenty of cheap money, you will have plenty of bubbles - like the housing bubble.  You will also plenty of artificial scarcities - like the recent onion scarcity (dont tell me that it is on account of the Govt's policy to allow onions to be exported.  It is bullshit).

Thanks Amit for referral. A good article.

Naturally, one who can multiply the capital with high interest rate , to be more profitable. Even, guys who do not get low interest rate money , will also be forced to go for high interest rate.

It is the necessity that decides and drives one to borrow money either at higher interest or lower interest rate. If a businessman feels an investment at a particular moment can turn out to be a very lucrative for the venture, he will certainly calculate the benefit and go for high investment.

No doubt, lower interest is liked by everybody. But, not all get it for investment. For domestic purpose interest rates are low and for commercial venture, it is always high. Financial risk calculation plays a vital role.

I heard in US, guys are ready to get CREDIT CARD with 75% interest & are there numerous companies doing such business.

Thanks Amit

Good article. Thanks for sharing.

I support your views, Amit.
& thanks for posting it on Toostep,Danish.

I support the views of Krugman, it is pointless to increase interest rates when already the situation is so bad.. What I too don't understand is if interest rates are increased who will be benefited..