Re:Global real interest rates and the ‘suprasecular’ decline...
by tomjakubowski on Thursday January 28, 2021 @11:27PM
(#25953905)
> interest rates are not low, we just measure them wrong. The dollar is being devalued
I don't follow. Could you explain? If the dollar is losing value, then wouldn't interest rates "really" be lower than they'd appear to be without accounting for the devaluation? Here's my reasoning:
Imagine the dollar loses 50% of its value in the next year. You park $100 in a 1% APY 12 month CD today. After a year, you've earned $1 in interest. But your CD has actually lost value in that time, even accounting for the interest money the bank gave you. In real terms, the interest rate was less than 1%; in fact, it was negative! So the 1% interest rate appeared higher than it "really" was.
I don't follow. Could you explain? If the dollar is losing value, then wouldn't interest rates "really" be lower than they'd appear to be without accounting for the devaluation? Here's my reasoning:
Imagine the dollar loses 50% of its value in the next year. You park $100 in a 1% APY 12 month CD today. After a year, you've earned $1 in interest. But your CD has actually lost value in that time, even accounting for the interest money the bank gave you. In real terms, the interest rate was less than 1%; in fact, it was negative! So the 1% interest rate appeared higher than it "really" was.