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History of Interest Rates:

Over the course of the past 100+ years, rates have been relatively stable, with brief bouts of economic volatility caused by specific factors, predominantly geopolitical events.

What does that mean?

If you look at the chart of long-term U.S. government securities below, you ll see that severe interest rate spikes only appear in a few instances (like the late 1980s and early 1990s). Let s paint the picture, starting at the beginning of the 20th century:

  • 1900-1953 Steady rates; the Korean War ends and the Cold War begins
  • 1950s-1960s Economic growth leads to pricing power of U.S. companies
  • 1970s Unprecedented economic slowdown and rising prices lead to "stagflation"
  • 1980s Recession; Fed hikes rates; Berlin Wall falls under Reagan s foreign policy
  • 1990s Inefficiencies in corporate America lead to layoffs; Greenspan takes preemptive role to return to normalcy
  • 2000s Rates drop to historically low levels; terrorism, global security measures and war efforts surge as rates start to slowly increase once again

history of interest rates

As noted, interest rates tend to rise as a result of geopolitical events and the Federal Reserve's fears about inflation. But what causes inflation?


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