The meeting of two past Democratic Presidents, two Republican Presidents linked by a family relationship, and President-Elect Obama indicates that there is a spirit of rapprochement on the horizon. Banks cut lending rates to historic lows, such as the Bank of England’s 1.5 % in the hope that this will spur spending and investment, thus boosting the economy. Bank of Canada’s rate has dropped from a high of 4.75 % in November 2007 to a recent low of 1.75 % in December 2008.
Monetary policy of the Federal Reserve System of the United States has focused over the past couple of years on adapting to the sub-prime phobia. Historical data from the Federal Reserve Bank of St. Louis, USA, indicates that in 1929, the prime rate ranged from 5.5 to 6.0 %. The year of the Great Depression (1930) saw it plunge to a low of 3.5 %. In 1974, the rate ranged from 8.75 to a peak of 12.0 % in July ~ a month prior to the ascension of Gerald Ford as President. In 1976, while the United States celebrated its two hundredth bicentennial anniversary and Mao Tse Tung died of cancer, the prime rate plunged to a low of 6.25 %. From then onwards, it gradually increased till it hit 20.0 % in 1981. In mid 1985, prime finally inched into single digit percentage points. For a brief spell of seventeen months between 1988 and 1990, the rate hovered around the 10.0 % mark. The end of 2008 has seen it droop to 3.25 %. As we attempt to correlate historic and economic events with fluctuations in monetary policy, we realize that perhaps we are too close to events in the past couple of years to successfully pinpoint those that have had a dramatic effect on the world.
There are many obvious factors at play here, and monetary policy cannot be the sole determinant of a marching economy. Stocks, oil prices, war in strategic locations, climate crises, employment and inflation, mortgage, construction and manufacturing ~ all these factors are at play. Above all, a tad of optimism that we have indeed rung out the old would help.
Monetary policy of the Federal Reserve System of the United States has focused over the past couple of years on adapting to the sub-prime phobia. Historical data from the Federal Reserve Bank of St. Louis, USA, indicates that in 1929, the prime rate ranged from 5.5 to 6.0 %. The year of the Great Depression (1930) saw it plunge to a low of 3.5 %. In 1974, the rate ranged from 8.75 to a peak of 12.0 % in July ~ a month prior to the ascension of Gerald Ford as President. In 1976, while the United States celebrated its two hundredth bicentennial anniversary and Mao Tse Tung died of cancer, the prime rate plunged to a low of 6.25 %. From then onwards, it gradually increased till it hit 20.0 % in 1981. In mid 1985, prime finally inched into single digit percentage points. For a brief spell of seventeen months between 1988 and 1990, the rate hovered around the 10.0 % mark. The end of 2008 has seen it droop to 3.25 %. As we attempt to correlate historic and economic events with fluctuations in monetary policy, we realize that perhaps we are too close to events in the past couple of years to successfully pinpoint those that have had a dramatic effect on the world.
There are many obvious factors at play here, and monetary policy cannot be the sole determinant of a marching economy. Stocks, oil prices, war in strategic locations, climate crises, employment and inflation, mortgage, construction and manufacturing ~ all these factors are at play. Above all, a tad of optimism that we have indeed rung out the old would help.
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