Shilling’s Remark on Real Interest Rates Challenged
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In “Downturn Is Too Late to Prolong Expansion” (Viewpoints, June 23), A. Gary Shilling, makes the statement, “Even after the big decline this spring, interest rates in real, or inflation-adjusted, terms are still more than twice their normal level.”
The Times recent Key Rates table shows banks paying less than 6.5% on money-market accounts and less than 8.5% on two-year certificates of deposit accounts. A saver in a 25% income tax bracket, with inflation at 4%, will realize less than 1% on his MMA or 24% on his CD.
Maybe Shilling is thinking of what the banks are charging for money, not paying for it. Maybe inflation at 4% still isn’t normal.
EMEL SMITH
Beverly Hills
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