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: An Educational Guide
5,000 YEARS OF INTEREST RATE HISTORY1
Today’s interest rate environment is truly unprecedented when looking at the historic record. We are a part of history in the making – with interest rates at the lowest levels in 5,000 years.
Sumer and Babylonia Greece Rome Byzantine Empire Dark Ages Modern Era
BC
AD
0%
5%
10%
15%
20%
25%
3000
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1000 800
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200 1
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1. 3000 BC – 1693 AD: Sidney Homer and Richard Sylla, A History of Interest Rates (Hoboken, New Jersey: John Wiley & Sons, Inc., 2005) 1694 AD – 2016 AD: Bank of England, Discount Rate: http://www.bankofengland.co.uk/monetarypolicy/Pages/decisions.aspx
3000 BCEarly records indicate that interest rates were 33% per year for barley and 20% per year for silver during the Sumerian period.
1900 BCThe Code of Hammurabi recognized Sumerian rates and set them as legal maximums. The overall effect was lower average rates throughout the Babylonian Empire.
300 BCBy the third century BC, Greek financial systems are highly developed and the use of credit is common place. This expansion of credit systems further pressures interest rates.
300 ADIndustry, trade and the Latin language decay as the fall of the Roman empire is well underway. Interest Rates surge as a result.
500 ADJustinian’s Code lowers legal maximum rates to 4-8%, based on the status of the creditor.
The chaos of the dark ages provides little reliable interest rate history.
1694 ADThe Bank of England begins lending at 6%.
: An Educational Guide
1313610/17 EXP 10/18
WealthVest2485 Manley Road, Suite A, Bozeman, MT, 59715, United States | 877.595.9325
THE MODERN ERA OF INTEREST RATES
A closer look at the modern era provides a detailed view of interest rate movements since 1850. Interest rates have never been lower in the United States, England, Japan or Germany. In the case of Germany, interest rates have even turned negative.
Record low interest rates provide two problems for retirees:
1. Record low interest rates make generating fixed income during retirement extremely difficult.2. Traditional fixed income solutions, like bonds, will decrease in value on the secondary market when interest rates rise.6
Speak with your financial professional to better understand today’s interest rate environment, and retirement solutions that exist.
U.S. Treasury3
AD
-2%
0%
2%
4%
6%
8%
10%
12%
Bank of Japan4
German Federal Bank5
Bank of England2
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
2. Bank of England, Discount Rate: http://www.bankofengland.co.uk/monetarypolicy/Pages/decisions.aspx
3. U.S. Treasury, 10 Year Treasury Bond Rate: http://www.econ.yale.edu/~shiller/data.htm
4. Bank of Japan, Discount Rate: https://www.stat-search.boj.or.jp/index_en.html5. Deutsche Bundesbank, Discount Rate: http://bit.ly/2d7H5np6. FINRA, Duration - What an Interest Rate Hike Could Do To Your Bond Portfolio: http://bit.ly/2dDZXsV