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Still, 2% over 30 years when inflation is running at 7%+ is negative in real terms. So maybe not infinite, but the key point is that investors are rewarded for
by voisin 5y ago
Still, 2% over 30 years when inflation is running at 7%+ is negative in real terms. So maybe not infinite, but the key point is that investors are rewarded for holding effectively anything when real rates are negative.
- danielmarkbruce 5y agoIf you are going to use inflation to turn nominal rates into real rates, you also have to adjust (reduce) the cashflows themselves. Ie, you discount real cashflow with real rates or nominal with nominal. You'll find as you reduce the nominal cashflows by the inflation rate to arrive at real cashflows.... they stop being a cashflow pretty quickly.