Hi Navb,
The real interest rate equals the nominal interest rate minus inflation.
So if the interest rate is 2.25%, and inflation is 3.25%, the real interest rate will be minus 1%.
The difficulty is in determining the real inflation rate.
According to Trading Economics "The annual inflation rate in Australia rose to 3.5% in Q4 2021".
But, what if the real inflation rate is considerably higher than the State would have us believe?
Here's a revealing result from a recent U.K. study: it was found that it took the same number of ounces of gold to buy a house fifty years ago as it does now.
So relative to gold, house values did not rise, but it takes many more British pounds to buy both houses and gold.
So what happened? Well it's obvious isn't it; the value of the pound has plummeted due to inflation.
The very same process is insidiously inflating away the value of the Australian dollar.
But can the State's artificially low interest rates get the better of inflation?
A question worthy of serious and studious attention I think.
Essentially, the point is, don't trust the State's fiat currency to generate wealth.
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