00:01
So here we are thinking about real versus nominal interest rates.
00:05
And the thing that you need to know here is the fisher identity.
00:09
The fisher identity tells you that the real rate is equal to the nominal rate minus inflation.
00:22
And to see why that makes sense sort of intuitively, imagine that you get 10 % more dollars.
00:28
You earn 10 % interest.
00:31
If prices also go up by 10%, there's 10 % inflation, you're breaking even, right? you get 10 % more dollars, prices are 10 % higher.
00:40
You can afford the exact same amount of stuff, which means the real rate is 0%, right? the real rate is 0%.
00:46
Your purchasing power, your real purchasing power has not changed here, right? that's the intuition...