In a message dated 12/7/03 1:02:09 AM, [EMAIL PROTECTED] writes:

>I recall a Japanese econ grad student telling me that in fact real interest
>rates were negative for some span and people were STILL saving in the late
>nineties in Japan.  He also blamed several bubbles at the time (notably,
>real estate in Japan) on this.  Interesting if true...  (Anyone know the
>details and can they justify the connection without resorting to framing
>biases of investors?)

We had negative real interest rates in the US during some of the inflationary
period from 1968-1982, particularly from 1978-1981.  The S&Ls got hit
precisely because rates of inflation greatly exceeded the rates on their home
mortgages.  All this time they were reporting nominal net income but were really
suffering large real loses, and when they paid nominal dividends they were
actually repatriating capital.  It's no wonder that by the end of the period they
were all grossly undercapitalized.

David Levenstam

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