In short, we think that real short-term rates will remain in negative territory for some time to come, and that monetary policy will continue to look more like it did in the inflationary 1970s than it did in the disinflationary 1980s and 1990s.All other things being equal, negative real interest rates tend to exert the following effects: * They discourage saving. People with cash in the bank are getting a rate of return that is too low to compensate them for purchasing power loss -- and it's even worse considering that savers have to pay tax on the interest income. * They encourage borrowing for the same reasons that they discourage saving. * They lead to increased speculation as investors seek higher returns to offset purchasing power loss. * They lead to reduced confidence in the dollar as a store of value. * They weaken the dollar against other currencies. * They put upward pressure* on the prices of commodities and precious metals as people seek out alternate stores of value, among other reasons**.Safe Haven | The Impact of Negative Real Interest Rates
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