# Interest Rate Thoughts



## Jim9guitars (May 5, 2012)

This may be more suited to a different section here but I have been wondering about something. During the 1970's and 80's in particular interest rates were quite high by todays standards, and things in the overall economic area were a lot better. Could the "powers that be" that keep holding back on raising interest rates be wrong?


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## NorthernRaven (Aug 4, 2010)

*Ask a silly question...*

Back then, skirts were also shorter and hair was bigger - perhaps by altering hemlines and coiffures we can magically return to better economic health. Bringing back bad 80s hair would seem to be even more unpalatable than austerity, however...


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## brad (May 22, 2009)

Interest rates have to be considered in conjunction with inflation. I remember in the 1980s when a basic savings account paid 5% and CDs in the US (same as a GIC here) paid 10%. But inflation was over 10%, so maybe we're better off now.


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## HaroldCrump (Jun 10, 2009)

brad said:


> I remember in the 1980s when a basic savings account paid 5% and CDs in the US (same as a GIC here) paid 10%.
> But inflation was over 10%, so maybe we're better off now.


We kept the inflation, but lost the interest rates.


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## dogcom (May 23, 2009)

Out west the 80's were a disaster. Seventies were good and then commodities tanked. You live out east so the 80's looked good but not out west. 

High interest rates killed real estate out west but in the end it was great if you bought a house and held it. High rates today could help destroy everything, but it would be the best thing ever for people looking to get into the housing market or moving up. Most of the idiots out there looking to buy think low interest rates are great but really they are fools. I would much rather buy a house for $300,000 at a higher interest rate then pay $700,000 for a house with an interest rate of 3 percent.


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## Jim9guitars (May 5, 2012)

dogcom said:


> Out west the 80's were a disaster. Seventies were good and then commodities tanked. You live out east so the 80's looked good but not out west.


I lived in BC from 1979 until 1993 and it was very good for me, but I worked for a communications giant, not in the mining/lumber sector. Things had been deteriorating for several of the last years I was there though, but we did well on our real estate when we sold and moved.


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## lonewolf (Jun 12, 2012)

Jim

The market is to big for the "powers that be to control". They try to stimulate the economy but are they really a match for the ratio of the population that are baby boomers that are aging, past thier peak spending years & getting ready for retirement. Short term they might be able to effect the market a little but mass psychology will win in the long term. @ some point when conditions are ripe the masses will revolt if the fed fights the mood of the masses.


The goverment thinks it can stimulate the economy by creating jobs in the public sector but they fail to realize the economy has x amount of energy (just like everything else) & if energy is transfered to the less efficient puplic sector the energy is lost from the efficient private sector.

When I look @ the 30yr bond U.S chart. I see an ending diagonal triangle that is completing or perhaps is even complete. I will be looking aprox 30 years from now to lock in higher interest rates around the time the 30 year cycle peaks.


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## humble_pie (Jun 7, 2009)

*Paging. Avrex. Central*

Doctor. Cart. Is. Back.


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## Daniel A. (Mar 20, 2011)

1976 wage & price controls, early 80s interest rates at 20% BC housing market tanked forest industry tanked and never recovered, 1989 Ontario housing market tanked in summer took many years to recover.

Today the debt levels of countries and individuals is so high historically deflation would likely follow any move up.


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## andrewf (Mar 1, 2010)

HaroldCrump said:


> We kept the inflation, but lost the interest rates.


Silly comment. Inflation is nowhere near what it was during the stagflation days of the 1970s and 1980s.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Silly comment. Inflation is nowhere near what it was during the stagflation days of the 1970s and 1980s.


Oh that's right, I forgot we are not in stagflation any more.
Our economies are growing by 10% every year.


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## dogcom (May 23, 2009)

Inflation since 2000 has been pumped into hot items by the Fed policy of easing and then QE. As soon as the Fed stops easing almost immediately the money departs the hot items like oil and goes right into the US dollar.

Consumer demand because of unemployment, low wage growth and debt is simply not there to cause any kind of sustained inflationary response.


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## 44545 (Feb 14, 2012)

From this post:

http://www.denverpost.com/business/ci_18983364



> What you do when you artificially hold rates down is ask the savers to subsidize the debtors...


(Thomas Hoenig, fmr. president of the Federal Reserve Bank of Kansas City)

I understand why the government is keep rates artificially low. They helped to create a mess of cheap debt and they don't want to induce a dramatic, systemic shock by raising interest rates.

I resent subsidizing my out-of-control-spending neighbors while I sock away money. Ant vs. Grasshopper though - their financial winter is going to be a cold one.


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