Under a fiat monetary system, interest rates are manipulated by the Fed, ostensibly to reduce unemployment or inflation, but really lead to a lot of arbitrage for the elite which results in a lot of malinvestment. Malinvestment is a misallocation of resources, a direct result of false market signals driven by distorted interest rates. Bankers of all types, riding the wave of artificially cheap capital, funnel resources into risky, high-yield projects - ventures that would otherwise not pass the test of viability in a natural market setting.
In such an environment, yield does not carry an opportunity cost - a fundamental cornerstone for investment decisions in a sound monetary system. With the fiat system, as yield surfaces, it is inevitably driven downwards due to the creation of loans leading to increased leverage. Bankers essentially get to create money out of nothing to get more of that yield. The difference between the rate they get the loan and the rate of the yield is their profit and they do nothing to get this money. Thus, yield is pushed towards zero as fresh money is printed, feeding arbitrage opportunities for the rent-seeking middlemen.
Yield, however, isn't easy to find because everything that has yield has been driven toward zero already. That means that bankers have to find riskier and riskier assets. This results in a surplus of capital being channelled into unsustainable ventures, leading to asset bubbles. Because the upside on them is so high (with leverage, it can be as high as 100x) and the decent probability of bailout, the bankers pile in.
However, reality always catches up. When these precarious ventures underperform or fail, the bubble bursts, leading to bailouts of the bankers. Whatever happens the bankers always win.
Contrast this with a sound money system, where opportunity cost plays a crucial role. Every investment decision bears weight, driving thorough due diligence and cautious allocation of resources. The arbitrage opportunities are not based on leverage and instead based on savings, meaning that the middlemen don't make nearly as much. Malinvestments are less likely to occur in this environment, promoting better companies.
So remember, when yield seems too good to be true, and the opportunity cost seems suspiciously absent, there are usually hidden costs and risks. Fiat money can create illusions of wealth and prosperity, but in the end, it's the solid principles of sound money that lay the foundations for a robust economy. Oh, and the bankers will always win in a fiat system.