In the 1970s and particularly in the early 1980s, bank deposit rates around the world were relatively high and savers at least felt that they were earning solid returns that might keep them in their ‘Golden Years’. In fact, in the early 1980s, most savers were indeed earning good returns thanks to the high real inflation adjusted interest rates that were on offer: for a while one could gain 10% real yields in USD as Volcker took over at the US Federal Reserve. However, as global central banks finally began to win their war against inflation from the mid 1980s onward (or a little later in New Zealand’s case), the rates on interest on offer from the simple bank deposit began to fade in both real and nominal terms. Indeed, had interest rates not declined, they would of course have become too high for the economies and certainly too onerous for private and public sector debtors to bear in anything other than the short term.
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