As a result, the real rate of interest nominal rates adjusted for inflation would actually rise in France.
Our fifth indicator is the real rate of interest, which is negative in over half of the economies.
Therefore, subtracting rising rates of inflation from falling nominal interest rates results in a falling real rate of interest.
Typical home-buyers will also find that, for any given real rate of interest, it makes sense to borrow more when inflation is low than when inflation is high.
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The U.S. dollar looks further than ever from paying a positive real rate of interest, leaving both investors and merchants to price scarce resources in an ever-depreciating, ever-more generously supplied currency.
Such a rate, they suggested, could lie anywhere between 4.5% and 6.5% ie, the sum of expected inflation of about 2.5% and a real interest rate of between 2% and 4%.
But there would also be a real interest rate of 6% on all outstanding debt.
At the other extreme, Brazil's real interest rate of almost 6% is among the highest in the world.
You need to read the speech for the full explanation, but the basic idea is that higher inflation can help push down the real cost of borrowing - the real interest rate - at times when nominal interest rates can't go any lower.
Although the interest rate is 0% to 0.1%, average deflation of -1.3% in the past 15 years means that the real interest rate (nominal interest rate 0% minus the price change of -1.3%) is a positive 1.3%.
However, real GDP had grown at an average rate of 4.2% over the previous ten years, and the real interest rate on Greek government debt was only about 1.5%.
At average annual real economic growth rates above the real interest rate on federal debt (about 3%), the present value of future federal revenues is infinity, regardless of tax rates.
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In his latest shareholder letter, Tocqueville Gold Fund chieftain John Hathaway bases that forecast on continued negative real interest rates: That is, as long as central banks push interest rates below the rate of inflation, gold performs well.
Moreover, in a deflation, where prices fall, a low rate of interest can be very high in real terms.
That would put the real, inflation-adjusted interest rate the cost of borrowing minus the rate of inflation deep into negative territory, even though the nominal rate would still be zero.
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According to this article a Louisiana tax lien certificate will give you a nice rate of interest if the owner pays the delinquent real estate tax.
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If real asset prices are falling, policy is tight regardless of the interest rate.
But the real roots of the crisis lay in such different economies sharing the same interest rate.
The Fed would have to abandon its interest rate fetish, and target the price of something real.
In our negative real interest rate environment, the market has begun to put a premium on the certainty of income.
If shares change in value, that must reflect a change in investors' assessment of either the prospective dividend flow (for example, because of fears about the future level of profits) or the right discount rate (for example, because of a change in inflationary prospects or in long-term real interest rates), or both.
Many developing economies also have positive real interest rates, meaning that you can earn a return on their bonds over and above the rate of inflation.
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The raise came when investors were demanding interest rates of more than 80% on some Russian government debt implying a real rate after inflation of more than 70%.
David Woo, a currency strategist at Bank of America Merrill Lynch, says that markets are now moving on real (after inflation) interest rate differentials rather than the nominal gaps they used to heed.
This is not true currently in the United States, where we have negative real interest rates, basically guaranteeing that the income generated from US government bonds will not outpace the rate of inflation.
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