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Of course it happens that way! Just look at the 1970s after the Arab Oil Embargo! We had double digit inflation, and money market funds were paying double digit interest.
And to those of us who lived through it, it didn't seem short. It seemed endless. IT's the reason why I chose a 30 year mortgage on a vacation home I just bought, that we never intend to sell. I figure that we're surely going to have high inflation at some point, so that low rate I got will stay, but I'll be paying off the loan eventually with dollars that are worth much less. I'll never forget my mom paying the mortgage on their house in a good outlying area of a major northeast metropolis. She paid $40/month for a big house in a great area at a time when I was paying $400/month for a horribly crappy shared apartment in a major northeast city.
i highly doubt a repeat of the 1970's inflation would have anyone saving . i lived through it and you were always behind the curve . as rates went up , inflation went even higher . there was nothing to save ! there was always to much month left at the end of the money . rates ALWAYS lag rising inflation .
When interest rate goes down, inflation goes up. When interest rate goes up, inflation goes down. That's what is taught in economics.
But with economics, sometimes the impossible becomes possible and the last few years have shown the interest/inflation relationship may needs to be reexamined.
Going forward, interest rate is going up; now what happens if inflation goes up with it? Has it ever happened before? And for argument sake, what will an economy looks like in such an environment?
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It happened in the late 70s and early 80s. And it wasn't fun.
I would certainly agree that consolidation, outsourcing, automation, and other factors have and will continue to alter our economy. It is not true that wages are pressured for all but the "most irreplaceable professions". There are now 60 million Americans living in households with greater than 6 figure incomes.
That would mean about 20% of the population. I would imagine a lot of those people are living in high cost states where barely 6 figures does not go very far. Not really anything to be happy about in that. I do agree with the other poster that the economy is sick.
Going forward, interest rate is going up; now what happens if inflation goes up with it? Has it ever happened before? And for argument sake, what will an economy looks like in such an environment?
I guess you weren't alive from 1970-1982. It sucked. Inflation adjusted stock & bond market returns sucked, almost as bad as the Great Depression. In the GD, sock prices dropped a lot more, but there was deflation. Many years of the 1970s and early 1980s had double digit inflation. 5% inflation in those years was considered low.
I guess you weren't alive from 1970-1982. It sucked. Inflation adjusted stock & bond market returns sucked, almost as bad as the Great Depression. In the GD, sock prices dropped a lot more, but there was deflation. Many years of the 1970s and early 1980s had double digit inflation. 5% inflation in those years was considered low.
I remember. The stock market took a real dive in 1975 and then again a lesser dive in the early eighties. If I remember correctly economic conditions were called stagflation. There was an investment that paid handsomely back in the early eighties. They were called TIGRs (treasury insured growth receipts). These TIGRs paid 11%, and were not callable. $2000 invested in 1983 paid $20,000 in 2003. I regret that I could only afford one of them.
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