Third, there is no way that the fragile economies in which we now live can sustain positive real interest rates and grow, whatever money market makers might like to think. Positive real interest rates will simultaneously cut consumption, government spending and investment, which are three of the four components of GDP growth (the other being net exports).
So where does the interest paid go? Does it disappear from the ecconomy forever? Or does it go into someone’s wallet. Where it can be used for one two things and must be used for one of those two things. Either investment or consumption.
Interest shifts who has the money, sure. But it doesn’t make it disappear.