Quote:
Originally Posted by bizaro86
Actual real interest rates are still very negative. The real rate is the interest rate minus the inflation rate, so it's negative as inflation is still higher than interest rates. That means savers lose purchasing power on their savings - ie if you save $100, you get say 3% interest so in a year you have $103. But the stuff you could have bought with $100 now costs $107, so you can't buy it.
And of course the $3 is income so you have to pay tax on it, so you really probably only have $102.
Inflation is absolutely a cost to savers, while higher interest rates are a cost to borrowers, and inflation is higher than interest rates, so borrowers are the net beneficiaries right now.
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Currently, I'd agree that no one is in all that great of a position.
However, for people looking to buy houses, the prices are stabilizing and will fall. However, the cost to get a mortgage is increasing dramatically. Savers will be able to save and gain some profits on saving. Even if overall value, accounting for inflation, is falling, relative to housing it's increasing.
But even in your scenario, the smart thing to do might be to just buy a house outright, once prices have hit the bottom, which will still be too high for most people with a mortgage. Once again, those with capital are benefiting.