[mateo411]

If the interest rate is at 7 percent, then inflation will probably be between 5 and 10 percent.

There would be other opportunities in an economy that will yield more than 7 percent, if the bank is offering 7 percent. Additionally, the inflation rate would be higher, so not investing your money, is losing it to inflation.

[taki1]

Inflation is at 5-10% if we measure it the same way we have always measured it till Reagan times. Then the Government started cooking books, but if we agree to use the same formula to calculate inflation as the one we used before 1990s, we are at 10% right now my friend. We have been for a few years. So in real terms we have had negative interest rates. By definition this makes investors to put money in anything but cash. When you think about it, this is why investors are so keen to keep money in things like Swiss Government debt that has negative return. Why would you ever do that if real interest rates werent in fact negative?