a net reduction in buying power. The complexity increases for bonds issued for a long-term, where the average inflation rate over the term of the loan may be subject to a great deal of uncertainty. In response to this, many governments have issued real return bonds, also known as inflation-indexed bonds, in which the principal value and coupon rises each year with the rate of inflation, with the result that the interest rate on the bond approximates a real interest rate. (E.g., the three-month indexation lag of TIPS can result in a divergence of as much as from the real interest rate, according to research by Grishchenko and Huang.) In the US, Treasury Inflation Protected Securities (TIPS) are issued by the US Treasury. The expected real interest rate can vary considerably from year to year. The real interest rate on short term loans is strongly influenced by the monetary policy of central banks. The real interest rate on longer term bonds tends to be more market driven, and in recent decades, with globalized financial markets, the real interest rates in the industrialized countries have become increasingly correlated. Real interest rates have been low by historical standards since 2000, due to a combination of factors, including relatively weak demand for loans by corporations, plus strong savings in newly industrializing countries in Asia. The latter has offset the large borrowing demands by the US Federal Government, which might otherwise have put more upward pressure on real interest rates. Related is the concept of "risk return", which is the rate of return minus the risks as measured against the safest (least-risky) investment available. Thus if a loan is made at with an inflation rate of and in risks associated with default or problems repaying, then the "risk adjusted" rate of return on the investment is . Importance in economic theory The amount of physical investment—in particular the purchasing of new machines and other productive capacity—that firms engage in partially depends on the level of real interest rates because such purchases typically must be financed by issuing new bonds. If real interest rates are high, the cost of borrowing may exceed the real physical return of some potentially purchased machines (in the form of output produced); in that case those machines will not be purchased. Lower real interest rates would make it profitable to borrow to finance the purchasing of a greater number of