Growing up in the Appalachian Highlands generally meant much time in the woods, including adventures of exploring and eventually returning home for supper.
Occasionally your path would take you to a dense laurel thicket that you had to maneuver through. Often halfway through the thicket, you had doubts about the adventure and just wanted to get to the other side.
This childhood memory comes back to me as I ponder on where we are as a country and economy. Fortunately, I have the base of personal history to fall back on as I consider today’s challenges.
In the late 1970s, we had a very dysfunctional political environment. Following the troubles of Richard Nixon, we had the unelected Gerald Ford presidency. This was followed by the “malaise” of the one-term Carter administration. Does this not seem like recent and current political history?
Rates in the late 1970s and 1980s were up. The prime rate hit 21.5% in December 1980. A prime rate of 8.5% now is downright low compared to that time. By the way, the prime did not go down to 8.5% until 1986.
In 1980, a new TV network came along called CNN. We no longer had to wait until 6 or 6:30 p.m. for world news, as it was with us 24 hours a day. Terrible news about war, weather, shootings, and congressional inaction was no longer a once-a-day phenomenon. We watched the bad news all day. Today we have the internet to stress us out even more.
While mortgage rates have risen — as I write this, the 30-year fixed rate is 7.88% — the 30-year fixed rate was over 10% for the entire decade of the 1980s. Mortgage rates did not drop below 8% until 1993. That constituted 13 years of high mortgage rates.
Late in 1979, the Soviet Union invaded Afghanistan. This led to a decade of fighting, which in the end, eroded the USSR and led to its breakup. Today, we have the same country, Russia, making the decision to invade a much stronger country than Afghanistan (Ukraine). Will history repeat itself as Russia diverts economic resources from its people to fighting? Will another despot go the way of so many others?
The price of gas in 1980 was $1.35 per gallon. Not bad, you think, until you remember that the minimum wage was only $3.10 in 1980. Today, gas hovers around $3.50, but most businesses must pay at least $12 per hour to get a potential employee even interested in considering coming to work.
To one degree or another, each generation and each time period gets wrapped up in its own importance and the hardness of its challenges. Certainly, each era has unique issues. For this era, it has been COVID and the rippling effects of battling this terrible nemesis.
While economic times are harder than they have been in a while, they are not as hard as they could be, as evidenced by the 1980s.
This is not to put a pollyannaish spin on the current environment where we operate our businesses. Times are challenging; however, it is always good to keep perspective.
Much like the young kids who hiked the hills and hollers with no GPS or cell phones and emerged from the woods with a few scraps and cuts, I believe that America and our region will emerge from this period of angst as well.
That’s something to keep in mind as we move into 2024.
Have a great week.
“Letters From Leton” is a blog series comprised of the weekly updates that Leton Harding – President, Chairman, and CEO of Powell Valley National Bank, shares with the Bank’s team members. These newsletters are full of uplifting anecdotes and intriguing insights that are applicable beyond the Bank, so we want to share them with you.