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+--- Thread: Then and Now (/showthread.php?tid=2182)
Then and Now - Scooterd - 02-13-2022
In the late 70’s and early 80’s, the Federal Reserve attempted to choke off inflation by repeatedly raising the Fed funds rate until it hit 21 percent. For a while, some consumers were able to take advantage of the higher returns on savings to enable them to afford the rising interest rates. But as rates rose, fewer individual and businesses were willing to commit to paying huge amounts of interest. Eventually, demand for money dried up, and with it, business investment and economic growth. We rapidly fell into a recession, which finally killed inflation, along with growth and employment.
Note: During the period of 1978 through 1981, the Fed pushed up short-term rates so that they were much higher than were long-term rates. This is an inversion of the typical yield curve, which is a plot of interest rates versus maturities. The inverted yield curve meant that it took a while for mortgage rates to approach the astronomical heights of the Fed funds rate. But by late 1981, mortgage rates peaked at 18.45%.
1980
Inflation in 1980 13.5%
A three-month CD in December 1980 earned 18.65%
Average cost of a gallon of regular gas: $1.25 / 2022 dollars $4.26
Average cost of a dozen eggs: $0.91 / 2022 dollars $3.10
Average cost of a gallon of Milk: $2.16 / 2022 dollars $7.37
IMHO, The fed needs to adopt a very "slow and steady" Fed funds rate approach, so as not too overshoot..
- Lest folks forget we do not need to revisit the late 70's early 80's. - The music was good, but other than that......
Just thoughts as I head off to barn, Hoof trimming day.
- Scoot