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Real Interest Rates Are Now Negative

Posted by billspaced | 8:39 AM | 1 comments »

According to the graph to the left, real interest rates are negative. I don't remember the last time this happened, though I am sure it has. But when?

My guess: Every recession in history...

Real interest rate = nominal interest rate - inflation

Nominal short term rates are very low (thanks to the Fed -- or no thanks) and inflation is rearing its ugly head. Time will tell how long this will last. But it sure seems like it's a good idea to go into debt, for the money you pay will be worth less than the money you get from incurring the debt.

Thanks to Greg Mankiw for the story.

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  1. billspaced // 7/21/2008 4:49 PM  

    Just found a reference to this post on Grammar and News Updates

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