Is There a Difference Between Real and Nominal Variables?

Central bankers are in danger of not recognizing the difference between nominal rates and real rates, says David Blanchard. If interest rates are still at one % then it is incredibly cheap for some one getting a nominal wage increase at eight% to borrow heavily - he argues. People may find that people's real wages have been squeezed, but at the same time, they are still able to leverat themselves up to buy houses or push house prices higher.