Holding Cash Isn't Just Looking Foolish In America, It's Now Looking Foolish Around The World

In America you’re paid nothing to hold onto cash these days.

Short-term interest rates are near zero, which thanks to inflation (1.1% year-over-year based on the most recent CPI release), means that your real return is negative. You’re thus incentivized to throw money into stocks, gold, long-term bonds, property, consumer spending, etc.

Yet negative interest rates are not just a U.S. phenomenon. Places such as Korea, China, India, Thailand, and Singapore also have negative real interest rates, as shown in a Morgan Stanley chart below.

While their short-term interest rates may be higher, their inflation is higher as well:


No wonder global stocks hit a 2-year high, gold is surging, and many property markets are hot. Holding cash is being penalised, across the world.

(Via Morgan Stanley, The Global Monetary Analyst, Chetan Ahya, 13 October 2010)

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