Do You Know The Real Cost of Money?

the financial industry is known for attention grabbing headlines, it might look a little different for further investigation. While attractive interest rates are often quoted, no one seems to confirm or highlight the "real" cost of money - or the interest rate on the loan less the current inflation rate, which is the true cost of money

.

After a period when financial leaders in the world were concerned about possible "deflation" and to have a huge impact on economic growth, these concerns now seem to be lifting with inflation showing signs of recovery to return to "normal" levels. While inflation has long been the enemy of investment markets, a small amount of inflation is essential to allow price rises to filter through the economy, ensuring that enough income to cover the salary increase, etc. Inflation is still the key housing market, where deflation would disastrous effect.

, while inflation is still controlled by the major financial areas of the world, now that the imminent risk of deflation had disappeared, the central banks have the opportunity to increase borrowing costs. It was an obvious knock on effect on the financial markets where borrowing costs have risen for financial institutions, which are fed to the consumer.

Here are some interesting facts to consider:

° actual costs in the world of money (adjusted to take into account the size of the markets around the world) has risen from 0.8% ten years ago, to 2.4% in November 2006 -. 200% increase in

° average U.S. real cost of money is not so high since March 1998, the refuge has increased to 3.95% in October.

° real cost of money in the UK is currently around 2.3% level, having risen from 2% in September - the Bank of England interest rate changes. As inflation is set to decline in 2007, the real cost is set to grow further.

Although recent changes in the real cost of money is expected, especially in relation to negative real rates in 2005 (ie, inflation was higher than average interest rates in the world), there is a risk of knock-on effect in the market work. By restricting the flow of funds for investment (ie, more expensive debt in real terms) there is a risk of economic slowdown, which resulted in less spending, job losses, etc.