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does that really work? inflation is a backward looking metric and interest rates are forward looking. this is just about making a prediction of the future. if
by hayksaakian 4y ago
does that really work? inflation is a backward looking metric and interest rates are forward looking.
this is just about making a prediction of the future.
if you believe that inflation will decrease then your guaranteed rate of return from interest rates is great.
if you believe that inflation will increase or stay the same, then yes we have "negative interest rates"
I don't think it's reasonable to call it a "real" interest rate, because I can't buy T bills against it and it has no guarantees
- niij 4y agohttps://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco...
- nohuck13 4y ago"Real" is a term of art for something inflation-adjusted, as opposed to nominal. That's it. Scare quotes and metaphysical discussion of realness are inferring deeper meaning that isn't there. Of course you can have expectations about real interest rates: if expected real and nominal interest rates are about equal, you'd tend to feel that keeping your money under your mattress is about as attractive as keeping your money in treasuries.
- ElevenLathe 4y ago"real interest rate" is also sometimes an informal way to refer to r* ("r star"), the discussion of which is definitely into metaphysical territory!