A.I.M. Users Bulletin Board

[ls7550]

RE: AIM (of Real values) since 1871

Yet another observation : Why did that AIM indicate such high levels of cash reserves in the late 1800's ? Simply because between 1871 and 1900 there was deflation, with the CPI index in effect halving over those years, whilst one year interest rates arithmetic averaged something like +5.2% (versus around -2.5% yearly average negative inflation (deflation)). i.e. 'cash' was generating +6.9% annualised real across 1871 to 1900. So again, a good call, even though the 'cash reserves chart' looks weird over those years.