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To: TRINDY who wrote (128344)	10/9/2001 2:26:26 PM
From: Mark Adams	Read Replies (1) \| Respond to of 436258

I stand by my statement. I can see why a borrower would want to repay debt in the event of deflation. But the only condition the real interest rate turns negative is when inflation exceeds the nominal rate. Nominal Rate - Inflation = Real rate In deflation, the inflation is negative- and a double negative goes positive. FWIW

To: TRINDY who wrote (128344)	10/9/2001 2:33:49 PM
From: BSGrinder	Respond to of 436258

Deflation is negative inflation. If you subtract negative inflation from an interest rate of, say, something near 0, then you have a positive real inflation rate, since you are subtracting a negative number (which is equivalent to addition). Which, I believe was Mark's point, that despite the interest rate near zero, the Japanese were getting a real return on their investment because of deflation. Right? /BSG I see you guys already straightened this out without me. Cheers!

To: TRINDY who wrote (128344)	10/9/2001 9:34:51 PM
From: mishedlo	Respond to of 436258

Mark, to get the real interest rate one subtracts the rate of inflation from the nominal rate. Thus, if Japan is truly experiencing deflation, the real interest rate is negative. Under conditions of deflation that have taken place in the US in its past history, borrowers have actually had to take creditors to court to demand their right to repay. Just wanted to clear up the thinking of any readers that might think you mean the real interest rate is positive. Cheers! In deflation the rate of inflation is negative thus SUBTRACTING a NEGATIVE number will yield a positive real interest rate. Does this sound correct? M