Essay Prompt
The History of the Interest Rate
Research the history of the prime interest rate since 1980.
Create a chart that shows the changing interest rate and depicts the economic and political conditions, factors, and reasons for the changing interest rate. Include a written summary of your findings. Your response should be 2-3 paragraphs (5-7 sentences).
The History of the Interest Rate
The prime interest rate peaked on 19 December 1980 at 21.50% from where it gradually declined 4% over the next four months before rising again to 20.50% by mid-1981. However, this marked the end of high interest rates, as from that point on the Fed took a sharp turn downward. By 1985, interest rates were at 10%. By 1992, they were at 6%. They flirted briefly with a return to 10% till 2000, whereupon the bursting of the tech bubble/dotcom bubble precipitated a further decline4% by 2003followed by a bounce back to a high of 8.25% in 2006 (at the height of the housing bubblewhich burst the following year, bringing the market down with it). Today, rates sit at 3.5% and the Fed has been very cautious about raising them even just 25 basis points, eyeing a fragile...
For instance, the Fed hiked at the end of the 60s, when the Vietnam War was in full swing and the military-industrial complex was making billions with the war economy going full tilt. However, with the end of Bretton Woods and the dollars peg to goldand the U.S.-Saudi alliance in the 70s, the petrodollar was born. The Iran hostage crisis had occurred at the end of Carters administration and ended with the election of Reagan. By the 1980s, the price of gold had risen some 300% from its 1970s high of $200 per ounce. Throughout the 80s and 90s, gold would ride a channel around $400 before dipping prior to a stratospheric launch in the 200s to more than $1800. All of this was courtesy of the inflationary practices of the Feds interest rate manipulation practices, bond bubble, its money printing (devaluation of the…
