December 6, 2011

THE BIG DIFFERENCE IS WE'RE IN THE MIDST OF THE DEFLATIONARY EPOCH NOW:

Were The Good Old Days Really That Good? (Richard Barrington, 12/06/11, Forbes)

Here are seven factors that link today with the early 1980s:

High unemployment. Troubled by today's 9.1 percent inflation rate? In 1982, the U.S. unemployment rate peaked at 10.8 percent, and between 1982 and 1983 it topped 10 percent for 10 consecutive months. As bad as the recent job market has been, unemployment peaked at 10.1 percent, and only stayed above 10 percent for one month.

Double-dip recession. People today are concerned about the possibility of a double-dip recession, but in the early 1980s the U.S. actually experienced one. A recession ended in July of 1980, only to be followed by a much longer one beginning a year later. As a result, the US economy spent 22 of the first 35 months of the 1980s in recession.

Troublesome interest rates. Here is a clear contrast: interest rates in the early 1980s were sky high, whereas now they are rock bottom. Six-month CD rates hit their all-time high of 17.98 percent in August of 1981; they bottomed out at 0.29 percent in January of 2010, and have now spent more than two years under 1 percent. Double-digit interest rates may sound good to people with CDs, savings, and money market accounts, but the flip side of those high bank rates is that it made mortgages much more expensive. Mortgage rates peaked at 18.45 percent in October of 1981; now, they've spent more than a year under 5 percent.


Posted by at December 6, 2011 6:12 PM
  

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