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This math ignores inflation. When interest rates are 0% and inflation is 1% you have -1% interest rates, which makes investing in FI bad. When interest rates ar

by rr808 4y ago

This math ignores inflation. When interest rates are 0% and inflation is 1% you have -1% interest rates, which makes investing in FI bad. When interest rates are 5% and inflation is 7%, real rates are -2% (maybe -3 or -4% after tax) which is worse than before.

JumpCrisscross 4y ago
> rates are 5% and inflation is 7%, real rates are -2% (maybe -3 or -4% after tax) which is worse than before Spot real rates versus long-term inflation expectations. If you think we’ll be at 3 or 4% inflation long term, the short term bite is fine. As such, yes, higher nominal rates, even if lower in real terms in the short run, can still have this effect.