Word: highers
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Dates: during 1970-1979
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...worse inflation. Robert Heilbroner argues that the postwar measures to avoid another Crash and Depression have "put a floor under the downward movement of the economy." This guarantee against disaster, in Heilbroner's view, has changed economic expectations so much that corporations raise prices and unions demand higher wages more recklessly than they otherwise would. The result is faster inflation. Thus the cure for the Great Crash, seen from this perspective, has created side effects that must be treated if the nation is to avoid the Great Inflation...
JOSEPH PECHMAN: "Volcker is headed in the right direction," says the director of economic studies at Brookings. But Pechman fears the move will increase chances that the recession will be longer and deeper than expected. He says that "unemployment will hit 8% sooner than expected" and might go even higher. To curb inflation without pressing down too hard on the economy, Pechman wishes that the Carter Administration would institute a more vigorous wage-price policy to supplement the Federal Reserve moves. Says he: "We ought to try, somehow, to have business and labor moderate their price and wage demands...
MORTGAGE LOANS: Interest rates averaged 11.15% in early September, and are heading higher. Many bankers predict that they may reach 14% by year's end. But in 24 states, including Illinois, New York and Texas, usury laws hold rates to 12% or less. Lenders there are likely either to cut back on making home-buying loans or attach tighter conditions to them. A typical instance: First Federal Savings & Loan Association of Chicago has just shortened the repayment period on all mortgage loans to 25 years from 29 years, and now requires a minimum 25% down payment, vs. 20% formerly...
...year. Builders will start fewer houses and charge more for them. The National Association of Home Builders figures that the average price of a new house, now $64,000, will go up $1,000 by Dec. 31, and the combination of price increases and higher mortgage interest rates will add $92 to the monthly payments of anyone buying that $64,000 house on a 30-year loan...
Historically, bonds have been difficult to sell at a time of rapidly rising interest rates. The IBM paper carried a yield of 9.41%, whereas even the new Treasury notes and government bonds returned fractionally higher interest. Also, over the Columbus Day weekend, rumors began to circulate that IBM's third-quarter earnings were down. In fact, as announced late in the week, they fell 18%. The unsold paper, possibly $300 million worth, was dumped on the open market, where it fared badly. IBM's timing ignored a hoary Wall Street axiom: "Never commit yourself to a major issue...