28 ms·
Wait, what? Until the 2000s, savings accounts definitely paid more than inflation, at least pre-tax. I remember getting 6% for much of the 90s. Sadly, this is
by SilasX 5y ago
Wait, what? Until the 2000s, savings accounts definitely paid more than inflation, at least pre-tax. I remember getting 6% for much of the 90s.
Sadly, this is showing to be really hard to google. The best I could find was 6-month CDs, which track it pretty closely[1] and this article [2] which supports my memory but is vague about which interest rate it's talking about.
Edit: Money market yields are also a good proxy, which I found here [3]
Edit2: Adding inflation link [4]. Example data points for (money market, inflation) from [3] and [4]:
1985: 7.7, 3.8
1990: 7.8, 6.1
1995: 5.5, 2.5
2000: 5.9, 3.4
[1] https://www.bankrate.com/banking/cds/historical-cd-interest-rates/ https://www.bankrate.com/banking/cds/historical-cd-interest-...
[2] https://advisor.visualcapitalist.com/us-interest-rates/ https://advisor.visualcapitalist.com/us-interest-rates/
(scroll down for the table)
[3] https://www.infoplease.com/business/economy/money-market-interest-rates-and-mortgage-rates-1980 https://www.infoplease.com/business/economy/money-market-int...
[4] https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093 https://www.thebalance.com/u-s-inflation-rate-history-by-yea...
- jfengel 5y agoI don't remember ever getting interest rates quite that high. I got 5% at times, but the numbers you cite are all well above that. I do think I overstated the case, though. The connection is clearer between interest and mortgage rates. Inflation rates should roughly track mortgage rates, which were often over 10% during the time period you're tracking, until everything crashed after the dotcom boom. I'm not sure what was keeping inflation comparatively low at that time. It shouldn't have been so much lower than the mortgage rates.
- SilasX 5y agoI don't see what that should follow at all. Depending on the supply and demand for loanable funds, investors may demand a high or a low risk-free interest rate, and there's no a priori reason it would only reach equilibrium at the rate of inflation. Certainly some investors are going to want to be compensated even in real terms for deferring consumption. Historically inflation was much lower and interest rates much higher, especially if you look back to the middle ages: https://economics.rutgers.edu/downloads-hidden-menu/news-and-events/workshops/money-history-and-finance/1823-paulschmelzing/file https://economics.rutgers.edu/downloads-hidden-menu/news-and...
- ramphastidae 5y agoThis is anecdotal but I remember the same right around and up until the 2008 crisis. Emigrant Direct was offering 5.25% savings accounts.
- SilasX 5y agoOh yeah for a short time in ~2006 money markets were around 5%. Again, hard to find historical charts that give the relevant info, but this one confirms it for 2006: https://www.infoplease.com/business/economy/money-market-interest-rates-and-mortgage-rates-2003 https://www.infoplease.com/business/economy/money-market-int...