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Equities might perform better than government bonds in the event of inflation, but might still deliver negative real returns as they did for much of the 1970s.
Falling prices encourage consumers to postpone spending in the expectation of cheaper goods tomorrow; they also make it impossible to deliver negative real interest rates if these are needed to drag an economy out of recession.
Falling prices not only increase the real burden of debt, they also make it impossible for a central bank to deliver negative real interest rates, because nominal rates cannot go below zero.If deflation causes real debts to swell, debtors may have to cut spending and sell assets to meet their payments.
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The use of tactics like torture lite must inevitably, they said, deliver negative returns.
"This is going to deliver negative impacts on inter-Korean relations," Yang added.
Falling prices have increased real debt burdens, depressed consumer spending, and made it impossible for the Bank of Japan to deliver the negative real interest rates that the economy needs to revive demand.
The biggest problem is that nominal interest rates cannot go below zero; if prices fall, this can make it impossible to deliver the negative real rates necessary to boost demand.
Many index-linked bonds in America and Britain are trading on a negative real yield.Real yields have been negative before.
Continental shift Accentuate the negative And then there was one Discredited Fail safe Correction: Buttonwood ReprintsThis time round, however, negative real yields arguably reflect optimism that the Federal Reserve, via the policy of quantitative easing, can deliver a good economic outcome and avoid the extremes of deflation or hyperinflation.
"It can go from positive to negative real quick.
(Until now, Russia has had negative real interest rates).
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