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Value of cash is determined by inflation, not by interest rates. Since the fed prints money to hit inflation targets, this reasoning doesn't really make sense.
by MiroF 6y ago
Value of cash is determined by inflation, not by interest rates. Since the fed prints money to hit inflation targets, this reasoning doesn't really make sense.
- hn_throwaway_99 6y agoMost people are putting that cash somewhere, aka a bank, so interest rates absolutely determine the expected rate of return on that cash.
- MiroF 6y agoYes, but focusing on the interest rates is reasoning from a price change. Interest rates are going down due to central bank action to combat deflationary pressure, so you can’t just look at interest rates in a vacuum and say that the rate of return is going down. Otherwise why has the value of the dollar increased since early March? Also, you realize that when the fed “sets rates” it’s not literally the rate of interest in your bank account, right?