[snidane]

Real interest rate depends on inflation which is an invented phenomenon of the 20th century. Inflation wasn't relevant in the preceding century and might not be relevant in 21st century either.

At least not in the current form it is measure as a CPI while ignoring asset price inflation in real estate and stock markets.

Whether that is a bug or feature remains to be seen, but for most people a psychological effect of large inflation has been present at least since the last big ceisia in 2008. Banks keep flooding the economy with new QE money and asset prices and rent payments keep increasing. Many people are not able to afford housing and birth rates plummet for not being able to have stability necessary to raise a family.

Whether somebody adds a patch to the inflation theory such as the concept of Biflation (inflation in asset prices, deflation in cheap goods manufactured by robots and imported from China at the same time) or throws thr concept of inflation out of the window completely is the question for economists for this century.

[mrep]

> while ignoring asset price inflation in real estate and stock markets.

Do you have any data to back this up? Some quick math shows annualized S&P 500 Return with dividends reinvested from april 2010 to april 2020 are 9.694% [0] which is entirely in line with historical returns [1]. Housing price per square foot hasn't really changed for most people either [2].

[0]: https://dqydj.com/sp-500-return-calculator/

[1]: https://en.wikipedia.org/wiki/S%26P_500_Index#Performance

[2]: https://www.supermoney.com/inflation-adjusted-home-prices/

[banku_brougham]

Your premise is quickly disprovable with reference to historical inflation data from many countries. Maybe try the Bank of England, they have data that goes back a ways.

OTOH perhaps we should give the author of The Wealth of Nations more credit for having anticipated the phenomenon of inflation back in 1776.