Liquidity has been anything but withheld in the western world.
Look at the G4 balance sheets and interest rates in the past decade.
They kept them super high at 0%, up to 4% higher than the equilibrium estimate, which caused inflation to perpetually undershoot and people's careers to be stunted. On top of that, they started giving out interest on reserves which further contracted liquidity.
The growth in excess reserves happened because money being made artificially too good at retaining value compared to private assets, caused people, businesses and banks to hoard it. If central banks would have been sufficiently aggressive at giving it out, they would ironically have given out a lot less because people would not have event wanted that much and instead would have continued keeping their savings in better functioning private markets.
The government creating paper assets that have an above market return, puts a gridlock in the private markets and destroys people's lives.
Take the gold standard, do you think anyone was able to borrow gold and pay less back? Isn’t that the actual interest rate we are discussing here?
Gold in a free market would tend to self adjust.
Buying gold as an asset when there is a "flight to safety" and then selling it in better times when there are enough other good assets available such as stocks with good dividends would mean buying gold when gold prices are high and selling it when prices are low thus resulting in negative returns.
Negative real returns happen in free markets. Blocking them causes huge problems.
It's sort of like saying "pre-modern medicine, therapeutic bleedings were common, and therefor we should consider them again".