To see how disagreement about real rates obtains, assume first that smart investors’ inflation expectations rise above the historical mean and thus drive up nominal interest rates.

http://web.stanford.edu/~piazzesi/illusion.pdf

 To see how disagreement about real rates obtains, assume first that smart investors’ inflation expectations rise above the historical mean and thus drive up nominal interest rates. Illusionary investors attribute any increase in nominal rates to an increase in real rates. As a result, they end up perceiving higher real rates than smart investors.