Because the way the fed increases interest rates is by selling a bunch of bonds. Which incentivizes people to moves money from the private economy to the Fed,

Because the way the fed increases interest rates is by selling a bunch of bonds. Which incentivizes people to moves money from the private economy to the Fed, and which leaves less money available to lend to small businesses. >In fact, higher interest rates would mean that the cost of liquid capital, a bank's main equipment for making money, were suddenly more productive, right? Banks basically just borrow money at x then lend it out at x+y. With y being expenses, defaults, and profits. Now if x grows that doesn't grow y, if anything it shrinks it because there are less individuals looking for a loan at the increases price. Basically if banks were toy makers, the interest rate would.be the price of plastic. Sure if the price of plastic went up toy makers would charge more for toys. But they wouldn't be making more money, if anything they'd me making less.