Quote:
Originally Posted by tgrundke
Mortgage rates averaged 7.5% between roughly 1970 and 2008.
They were over 16% in 1981.
Rates have been in a cyclical decline since 1982, and we're headed into a period of elevated interest rates for longer. Much longer. I'd expect that 5% - 8% will become the norm for the foreseeable future.
Auto loan rates averaged around 9% throughout the '90s, and up until the financial bust in 2008 they were between 6.75 - 7.5%
My point being: 0% (ZIRP) was an anomaly and mistake that created a lot of downstream ramifications.
Higher ("normal") interest rates help the average person because it forces price discovery that makes things like houses and cars more affordable. It significantly reduces big speculative bubbles and it makes everyone more cautious in how they use money. Higher rates incentivize low risk saving. Low rates incentivize spending.
Low interest rates mask problems until they hit a crisis.
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We should have had higher rates since approximately 2016 or so when the economy was in full steam this would have prevented a ton of the speculation we saw... the fed was pressured into keeping rates low as the moment they started raising them, the markets immediately felt downward pressure... and of course no matter which admin is in the White House, their no1 priority is unemployment which they couldn't see tick up.
Then Covid came... and we had rates lowered further and later doused with a large supply of free money for a ton of corporations and individuals further skyrocketing inflation (in a supply constrained environment lol)... basically the past 5 years of economic policy has been fail after fail.
It would be STUPID for anyone in this thread to compare to anything historically because we have NEVER been in a situation like we are in now where there is a ton of money in the market, prices are at an all time high, inflation is still high and rates are at their highest for 20 years... this makes things very unaffordable for the middle class and even worse for those below that. So far the rising rates have only made things more expensive not less because little price correction has been seen on anything...
...oh and we will ABSOLUTELY go back to lower rates in due time... this country lives and breathes on cheap credit and endless quantitative easing... watch the stock market carefully... the moment it takes a 15% nose dive or more... be ready to refinance your home
