When I was home from college for Christmas vacation in December 1980, these were some of the business statistics our country faced, compared with the statistics at the close of trading today. Granted, I am looking at only three statistics and I am cherry picking the ones that, to me, paint a picture that is certainly not as dire as the mainstream media would have us believe; yet, I am tickled pink that my credit card interest rate isn’t calculated off the older prime rate.
1980
Dow Jones Index (December 31, 1980)*: 963.99
Prime Rate**: 21.50%
Average mortgage interest rate***: 14.95%
2008
Dow Jones Index: 8852.22
Prime Rate**: 4.50%
VA mortgage rate (30 year) @ my local credit union: 5.75%
Here is something else I found interesting. A look at the history of the prime rate in America reveals that 1980 was a pretty depressing year. Just look at these numbers from a table on the Wall Street Journal prime rate page. Between September and December 1980, the prime rate increased 10.00%, with more than six points of that increase coming in the last eight weeks of that period:
August 27, 1980 11.50%
September 8, 1980 12.00%
Septmeber 12, 1980 12.25%
September 19. 2008 12.50%
September 26, 1980 13.00%
1.50-point increase. Minimum increase 0.25%.
October 1, 1980 13.50%
October 17, 1980 14.00%
October 29, 1980 14.50%
1.50-point increase. Minimum increase 0.50%.
November 6, 1980 15.50%
November 17, 1980 16.25%
November 21, 1980 17.00%
November 26, 1980 17.75%
3.25-point increase. Minimum increase 0.75%.
December 2, 1980 18.50%
December 5, 1980 19.00%
December 10, 1980 20.00%
December 16, 1980 21.00%
December 19, 1980 21.50%
3.25-point increase. Minimum increase 0.50%
Just imagine if you had a credit card whose interest rate was calculated at prime + 3%. In 1980, the interest rate on that credit card could have changed from 14.50% to 24.50% from Labor Day to Christmas. Talk about putting the brakes on spending.
So, how do you feel about the current financial crisis now?
*Dow Jones Industrial Average History
**Prime Rate History
***Mortgage Rates Slides to 17.54%
1 comment:
The Fed has been dumping vast sums of cheap cash into big banks in the hope that they will eventually start lending to each other again. This money will enter the economy in short order, and inflation will burn a hole in everyone's wallets. Fed will have to raise rates late in 2009 to combat inflation, and Prime will be 9%+. Enjoy the low rates now. Lock in a fixed rate on any major purchase you plan to make now. And save some cash for next year. In late 2009, CD rates will go way up in synch with the Fed Funds Target Rate. Yup.
Post a Comment