An interest rate is a price. Prices convey information. Distorted prices convey misinformation. Build a new factory? Reckon the value of a future cash flow? Deduce financial risk from a credit spread? Manipulated rates give you the data you need to arrive at the wrong conclusion.
Like the flu, mispricing is communicable. Like a sneeze, arbitrage transmits the disorder from one place, and one asset class, to the next. Pygmy interest rates lead to tiny real-estate cap rates and towering equity P/E multiples.
~ Jim Grant, "Meet the Carrefour S.A. senior unsecured 1 3/4s of 2022," Grant's Interest Rate Observer, September 22, 2017