Interest is an information bridge connecting the present with the future.

 From John Mauldin's free newsletter which you can subscribe to.

"Intertemporal Bridge

As I explained earlier in this series (see Time Has a Price), interest rates aren’t simply prices; they are information. Artificially manipulated rates deliver wrong information, causing poor decisions. Ill-conceived central bank policies produce random noise, preventing markets from discerning the necessary signals. Chancellor has possibly the best metaphor I’ve ever seen to explain this.

“Imagine that the present and future are two countries, separated by a river. Finance is the intertemporal bridge that joins them together, connecting the present with the future. By acts of borrowing and lending, and saving and investing, we shift expenditures across time. Interest is the toll levied on borrowers for bringing forward consumption and the fee paid to savers for moving consumption into the future. The level of interest regulates the traffic on the bridge and its general direction. When the interest toll is raised spending is pushed into the future, and consumption is brought forward when the toll is lowered. In an ideal world, people should save enough to meet their future needs, but not so much that current spending is depressed. Under such circumstances, the traffic across the bridge is orderly in both directions.

“This delicate balance is upset when the market rate of interest falls below society’s ‘crystallized impatience.’ When the interest rate is higher than an individual’s time preference, he or she will save more for the future. Conversely, when the market rate is below the public’s time preference people borrow to consume. An abnormally low rate of interest boosts current spending, but the benefits don’t last. You cannot have your cake and eat it, at least not indefinitely. Cake is not the only item on the menu. People have a choice: jam today or more jam tomorrow. The rate of interest influences their decision.”

The problem isn’t just artificially low rates. Artificially high rates send wrong signals, too. The point is this process works only when it finds its own equilibrium. Outside interference—like that of central banks—distorts these intertemporal transactions.

It is important to remember that well past the middle of the last century the Federal Reserve concerned itself mainly with bank solvency, not interest rates. Greenspan was the first to realize that he could “juice” the markets and make everyone happy. It was the beginning of the current round of hubris."