Highly leveraged economies rely on low nominal interest rates to keep debt-service costs manageable.
When inflation rises, for instance, bondholders will expect a higher nominal interest rate on new debt.
The possibly sharp increase in nominal interest rates would tend to reduce demand for base money.
Low or falling nominal interest rates and inflation were crucial to reducing the debt-to-GDP ratio.
One consequence of this prolonged fight is that nominal interest rates have been raised off the floor.
There is no forward guidance that can reduce nominal interest rates, but does that mean forward guidance is impotent.
Therefore, subtracting rising rates of inflation from falling nominal interest rates results in a falling real rate of interest.
Some suggest the Swiss ought to announce a peg to the euro or engineer a negative nominal interest rate.
The FRB is now talking about nominal interest rates stretching out into 2014.
Deflation, combined with huge corporate debts and high nominal interest rates, has led to sharp falls in companies' profitability.
In 2004, Portugal's economy grew by 1%, Ireland's by almost 5%, but both had the same nominal interest rate.
By suppressing nominal interest rates and pushing real rates into negative territory, the Fed has engaged in financial repression.
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Lord North particularly liked them because they carried a low nominal interest rate.
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Nominal interest rates are close to zero, and yet the economy stagnates.
The problem for investors comes when real interest rates are negative, when the nominal interest rate won't keep up with inflation.
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Now that nominal interest rates in most developed markets are close to zero, there is less scope for the carry trade.
With inflation expectations that exceed the nominal interest paid on saving accounts, money market funds, and Treasuries, real returns are negative.
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And in a more inflationary economy, lenders will demand, and get, higher nominal interest to compensate for the erosion of purchasing power.
Yet there was nominal interest in single-function gadgets like e-books (growth to 9% from 8%) and GPS devices (from 9% to 11%).
As a result, nominal growth rose above nominal interest rates, debt levels fell by 250%, and stocks rallied between 1948 and 1969.
The path of prices, and hence the inflation portion of nominal interest rates fell, and as best we can tell will not be raised.
Most serious of all, deflation can make monetary policy ineffective: nominal interest rates cannot be negative, so real rates can get stuck too high.
Reprivatisation of bank lending should proceed naturally as commercial banks offer positive nominal interest rates and bid funds away from the postal saving system.
Nominal interest rates should reflect real interest rates in a world of zero inflation, if they are to perform their function of allocating capital efficiently.
Most importantly, when nominal interest rates can go no lower, a higher inflation rate corresponds directly to a lower, and more stimulating, real interest rate.
If you adjust nominal interest rates by using these measures, or even the dollar itself, which has lost 11% since June, rates are already profoundly negative.
Long-term nominal interest rates are influenced by many things, including investors' expectations of inflation and future short-term rates, and a risk premium for holding long-term assets.
In economic textbooks currency movements counter the differences in nominal interest rates between countries so that investors get the same returns on similarly safe assets whatever the currency.
This means that unless investors are repeatedly surprised, inflation will lead to higher nominal interest rates as debt is refinanced, and in turn to an unchanged real debt.
Curiously, at the same time, economic stress can lead to manipulation of foreign-exchange rates, usually to keep local currencies relatively low even as nominal interest rates rise with inflation.
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