9 ms·

In order to draw a conclusion, we should look at the _real_ interest rate vs. the nominal one.

by bald 6y ago

freejulian85 6y ago
If you calculate inflation using the same method they used in the 80s, inflation is currently just as high.
snidane 6y ago
Real interest rate depends on inflation which is an invented phenomenon of the 20th century. Inflation wasn't relevant in the preceding century and might not be relevant in 21st century either. At least not in the current form it is measure as a CPI while ignoring asset price inflation in real estate and stock markets. Whether that is a bug or feature remains to be seen, but for most people a psychological effect of large inflation has been present at least since the last big ceisia in 2008. Banks keep flooding the economy with new QE money and asset prices and rent payments keep increasing. Many people are not able to afford housing and birth rates plummet for not being able to have stability necessary to raise a family. Whether somebody adds a patch to the inflation theory such as the concept of Biflation (inflation in asset prices, deflation in cheap goods manufactured by robots and imported from China at the same time) or throws thr concept of inflation out of the window completely is the question for economists for this century.
- mrep 6y ago
  > while ignoring asset price inflation in real estate and stock markets. Do you have any data to back this up? Some quick math shows annualized S&P 500 Return with dividends reinvested from april 2010 to april 2020 are 9.694% [0] which is entirely in line with historical returns [1]. Housing price per square foot hasn't really changed for most people either [2]. [0]: https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/ [1]: https://en.wikipedia.org/wiki/S%26P_500_Index#Performance https://en.wikipedia.org/wiki/S%26P_500_Index#Performance [2]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
  - deleted 6y ago
    [deleted]
- banku_brougham 6y ago
  Your premise is quickly disprovable with reference to historical inflation data from many countries. Maybe try the Bank of England, they have data that goes back a ways. OTOH perhaps we should give the author of The Wealth of Nations more credit for having anticipated the phenomenon of inflation back in 1776.
BenoitEssiambre 6y ago
Market inflation expectations are very low: https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/T10YIE Which means these high yields are more of a sign of high risk of default than of high inflation. :-(

In order to draw a conclusion, we should look at the _real_ interest rate vs. the nominal one.

by bald 6y ago

In order to draw a conclusion, we should look at the _real_ interest rate vs. the nominal one.

freejulian85 6y ago

If you calculate inflation using the same method they used in the 80s, inflation is currently just as high.

snidane 6y ago

Real interest rate depends on inflation which is an invented phenomenon of the 20th century. Inflation wasn't relevant in the preceding century and might not be relevant in 21st century either. At least not in the current form it is measure as a CPI while ignoring asset price inflation in real estate and stock markets. Whether that is a bug or feature remains to be seen, but for most people a psychological effect of large inflation has been present at least since the last big ceisia in 2008. Banks keep flooding the economy with new QE money and asset prices and rent payments keep increasing. Many people are not able to afford housing and birth rates plummet for not being able to have stability necessary to raise a family. Whether somebody adds a patch to the inflation theory such as the concept of Biflation (inflation in asset prices, deflation in cheap goods manufactured by robots and imported from China at the same time) or throws thr concept of inflation out of the window completely is the question for economists for this century.

mrep 6y ago
> while ignoring asset price inflation in real estate and stock markets. Do you have any data to back this up? Some quick math shows annualized S&P 500 Return with dividends reinvested from april 2010 to april 2020 are 9.694% [0] which is entirely in line with historical returns [1]. Housing price per square foot hasn't really changed for most people either [2]. [0]: https://dqydj.com/sp-500-return-calculator/ https://dqydj.com/sp-500-return-calculator/ [1]: https://en.wikipedia.org/wiki/S%26P_500_Index#Performance https://en.wikipedia.org/wiki/S%26P_500_Index#Performance [2]: https://www.supermoney.com/inflation-adjusted-home-prices/ https://www.supermoney.com/inflation-adjusted-home-prices/
- deleted 6y ago
  [deleted]
banku_brougham 6y ago
Your premise is quickly disprovable with reference to historical inflation data from many countries. Maybe try the Bank of England, they have data that goes back a ways. OTOH perhaps we should give the author of The Wealth of Nations more credit for having anticipated the phenomenon of inflation back in 1776.

BenoitEssiambre 6y ago

Market inflation expectations are very low: https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T5YIE https://fred.stlouisfed.org/series/T10YIE https://fred.stlouisfed.org/series/T10YIE Which means these high yields are more of a sign of high risk of default than of high inflation. :-(