Negative Real Interest Rates Real interest rates are negative. Everybody Panic!!! Seriously though, what do you guys think about that?

It happens.

does that mean the bond market is predicting deflation? If so, the bond market is on crack.

No - it means that inflation is higher than nominal interest rates. It means that our money is getting devalued and there is not lots of demand for it. TIPS bonds, btw, have done very well this year.

TIPS did well again today. Real rates becoming more negative…

it means commodities go higher

And even worse inflation when crude prices go up

i think crude will be lower by the end of the year. now food prices on the other hand… i’m thinking its soon gonna be cheaper for me to buy a cow

Negative interest rates mean negative interest rates, not simply that nominal rates are lower than inflation rates. This has happened before, and will probably happen soon.

By definition, negative real rates means nominal rates are lower than inflation.

How about negative nominal rates? Would you accept that?

Sure. But no one was talking about nominal rates.

Negative nominal rates crrate all kinds of unusual problems. Very bad idea.

Very bad idea, if you have a choice. But when it happens, it happens, and there is nothing we can do about it. The question is, could all of this mess eventually lead to negative nominal rates? We came close to that in 2002.

We had nominal negative rates in Euroyen and repo then. It was bad and they got fixed.