Someone please tell Randi Rhodes interest rates

[nomatrix]

during Reagans presidency.

http://mortgage-x.com/general/indexes/prime.asp

January 9,1981 20.00%

She's said 10%. It stayed in the teens during most of his presidency.


$1,671.02 a Month at 20% on $100,000 loan (that without taxes)
$877.57 a Month at 10%

[Name removed]

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[redqueen]

3. How about just reporting facts for honesty's sake?

:crazy:

[nomatrix]

7. You are right, the president doesn't set the interest rate

Some haven't bought a house before for whatever reason.
We paid 16% interest rate on our 1st house we bought during his presidency. I just wanted to point out the difference in case someone is calling in to her. BTW, welcome to DU.

[cheezus]

10. their policies influence them

if there's a defecit, the government needs to compete for the money, and rates go up.


of course, that's horribly oversimplified

[swag]

2. She may have been thinking of the Fed Funds rate

All would do well to learn the difference between short-term and long-term interest rates and what drives it all.

[theboss]

4. After '82, it hovered between 8 and 12

It was obscenely high during the 70s.

[demon67]

5. I am not sure of her point

What is she trying to illustrate? Looking at the data, it looks like interest rates went from 20% when Reagan took office to 8.5% when he left. Is she arguing that rates were high when he was in office? Or that he kept them high? Depending on her argument, she might be wise to denote them as 10%.

[theboss]

6. Yea, I'm not seeing the point

You can't blame Reagan for the high rates in 81 and 82. And I don't see why you would argue that they should have stayed that high.

And I also don't see what Interest Rates have to do with Reagan. Volker was in charge until '87.

[nomatrix]

9. Sorry I didn't make this clearer

While rates were high, you had deduction you were able to make, in order to make it worthwhile to own, or invest in rental property. As you can see from my example the difference in 20% & 10%. After the 1986 that rug was pulled out......



1986 Tax Reform Act
(Reagans baby)
http://www.nysscpa.org/cpajournal/old/10917112.htm

"The adverse effects of the 1986 tax changes on real property values were a major contributing factor in the collapse of many savings and loan institutions. Mortgages and similar real property loans constitute a significant portion of S&Ls' asset portfolios. Significant declines in the market value of real properties, then, would result in the erosion of the value of these institutions' major assets. In the final analysis, there could be a reduction of their capital to perilously low levels--leaving some institutions with negative capital values.

The S&L bailout itself has contributed to distress in the real estate industry. Efforts by the Resolution Trust Corporation to dispose of properties taken over in the closing of failed or failing S&Ls artificially add to the stock of real property on the market and exert downward pressure on market values. This additional decline in real property values further imperils lending institutions that might otherwise be in relatively good financial condition."

[theboss]

13. The two are unrelated

Interest rates don't affect the actual cost of real estate; they affect the access to the money to purchase real estate. The 1986 tax cuts hurt people who had already invested heavily in real estate, but they were going to be hurt no matter what the interest rates were.

[nomatrix]

14. You will definately get an argue on that

"Interest rates don't affect the actual cost of real estate"

See buyers and sellers markets.

Invested heavily? Did you own a home that you were paying those interest rates on during that time? Ask anyone who filed before and after the law went into affect and see if they ended up with taxes due.
You were also able to "income average" if you were laid off from your job and received you 401 in a lump sum.

1986 tax reform

removed the credit card interest deduction
removed sales tax deduction
removed gasoline tax deduction
removed the dividend tax exemption
reinstated the "marriage penalty tax"
removed the IRA deductibility
pushed depreciation on rental property to 27 years from 17 years
taxed income from tips

[theboss]

15. I still don't know what your argument is.

Are you saying that interest rates should have stayed at 20 percent or that there should not have been the 1986 tax reform? I don't know what we are debating at this point.

[On the Road]

8. Reagan Inherited High Interest Rates --

that is true. You can't blame him for creating them.

But presidents do have a lot indirect influence on the federal funds rate both by making their opinion known to the Fed and by Fed response to presidential actions (trade agreements, budgets, etc).

The thing about interest rates during Reagan's terms was how high they were relative to inflation -- way, way above historical margins. The financial industry was afraid of inflation being reignited (partly due to the defecits), and that had a lot to do with it.

[Name removed]

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[kentuck]

12. His high deficits kept interest rates high for much longer....

than they should have been. The upshoot in oil prices was not a permanent inflation condition. Reagan made matters worse than they should have been.

[NuttyFluffers]

16. /ding "we have a winner!"

yup, yup. gov't spending/debt has great influence on the range made available to flux in interest rates. the sec. of treasury had his hand crippled by bad governance. a to b to c. connect the dots (or follow the money :) )

[no name no slogan]

17. Low interest rates are NOT in the best interest of working people

Plus, the Fed chair has much more control over those than the president.

IMHO we worry too much about interest rates, especially as they apply to consumer lending. Low rates are not such a boon to working-class people as many people (including many Dems) have made them out to be.

Think about Greenspan's whole philosophy re: the economy. At the first sign of ANY sort of inflation-- which, BTW, includes increases in wages for workers-- he clamps down HARD on the money supply, by upping the interest rates. Greenspan's overzealotry was the main cause of the recession in the early 90s, btw, when he upped the interest rates by over two points in the span of a year.

So, instead of even allowing even MODEST gains in worker wages, he encourages an almost artificially low interest rate, which supposedly encourages "growth" in the economy (borrowing by large companies), but actually encourages the working-class people to take on more debt-- oftentimes just to keep on top of their current expenses.

Can you see where this is leading yet? ;)

Think about it: Greenspan and his ilk stomp out any sign of wage growth-- even that which is simply keeping up with inflation, and work to keep interest rates VERY low, which encourages working people to TAKE ON MORE DEBT, just to cover the everyday costs of living in this country.

What does that mean? A greater TRANSFER OF WEALTH from wage-earners to creditors (i.e., big banks and credit card companies). This means higher debt ratios among workers, more bankruptcies, and the accellerated transfer of wealth from working people to the rich!

"What Marxist claptrap!" I can hear some say. But, honestly, is anything I've said NOT TRUE? I am not a Marxist, but it's pretty clear to see how this kind of "vulture capitalism" is NOT healthy for the greater well-being of this country. It encourages the concentration of wealth among a few, destroys the middle class, and decimates the working class. At its root, it is the most anti-capitalist system around, as it DIScourages diversity and competition in the economy. It's awfully hard to compete on a "level playing field" when 5% of the people own 95% of the field itself.