Visualizing Real Interest Rates Around the World

[EDIT: For up-to-date real interest rate charts see here.]
 
One of the most important themes over recent years has been the presence of negative real interest rates in the developed world. Whether one likes it or not, it has a big impact on how institutional money is allocated. Professional investors, who are under constant pressure from clients to make money, feel compelled to chase market momentum, especially when their clients’ money is slowly withering away because of negative real rates of interest. As Jeremy Grantham puts it:

 

The central truth of the investment business is that investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples’ money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority “go with the flow,” either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price. There are many other inefficiencies in market pricing, but this is by far the largest. It explains the discrepancy between a remarkably volatile stock market and a remarkably stable GDP growth, together with an equally stable growth in “fair value” for the stock market.

 

We think that negative real rates only aggravate the situation…

 

So, to keep you posted on this dynamic here we present a comprehensive guide to real interest rates around the globe. The first chart gives you a global view, and the latter charts allow you to explore individual countries in detail. We include local currency gold prices so that you can gauge the impact of real rates on capital flows. Data updated to December 2012:

 

Real Interest Rates Around the World

Edge colors indicate the direction of the trend: green => up, red => down and gray => neutral – Click to enlarge.

 

Click below to view real interest rate charts for individual countries.

 

North America Europe Asia Eastern Europe Latin America Australasia Middle East & Africa
United States Euro Area China Czech. Republic Brazil Australia Israel
Canada Switzerland Japan Hungary Chile New Zealand Turkey
- Sweden India Poland Mexico - South Africa
- Denmark Indonesia Russian Federation - - -


 

North America

 

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Real Interest Rates in the United States – Click to enlarge.

 

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Real Interest Rates in Canada – Click to enlarge.

 

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Europe

 

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Real Interest Rates in the Euro Area – Click to enlarge.

 

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Real Interest Rates in Switzerland – Click to enlarge.

 

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Real Interest Rates in Sweden – Click to enlarge.

 

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Real Interest Rates in Denmark – Click to enlarge.

 

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Asia

 

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Real Interest Rates in China – Click to enlarge.

 

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Real Interest Rates in Japan – Click to enlarge.

 

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Real Interest Rates in India – Click to enlarge.

 

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Real Interest Rates in Indonesia – Click to enlarge.

 

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Eastern Europe

 

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Real Interest Rates in the Czech Republic – Click to enlarge.

 

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Real Interest Rates in Hungary – Click to enlarge.

 

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Real Interest Rates in Poland – Click to enlarge.

 

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Real Interest Rates in the Russian Federation – Click to enlarge.

 

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Latin America

 

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Real Interest Rates in Brazil – Click to enlarge.

 

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Real Interest Rates in Chile – Click to enlarge.

 

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Real Interest Rates in the Mexico – Click to enlarge.

 

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Australasia

 

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Real Interest Rates in Australia – Click to enlarge.

 

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Real Interest Rates in New Zealand – Click to enlarge.

 

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Middle East & Africa

 

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Real Interest Rates in Israel – Click to enlarge.

 

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Real Interest Rates in Turkey – Click to enlarge.

 

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Real Interest Rates in South Africa – Click to enlarge.

 

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See here for our collection of rare historical economic data.

Posted Jan 21, 2013