High bank interest rates of the 80s

Factual Questions
1

I remember back in the 80s in Greece, bank accounts would offer ridiculously high interest rates. For example 8-10% for a simple deposit account and more than 20% for long term accounts. Today a friend of my father showed me a contract from that era showing a 90% interest rate :eek:

Now granted, the inflation rate back then was higher than today but still those interest rates were several times higher than inflation. I remember that if you had large amounts of money back in those days, it made sense to just keep it in the bank.

Then some time in the 90s, almost overnight, the interest rates fell to whatever levels they are today.

What really happened?

2

I’d like to know too. In 1989 I was getting 18% on my NOW account as long as I had a $1,000 balance. Heck, even as a kid, I had a bank account for myself, which usually ranged between $25.00 and $200.00 and I was getting 5% interest. And it was free

:slight_smile:

3

Can’t vouch for the accuracy, but This link has a downloadable excel file with historical Greek bank interest rates from 1951-2002.
Interest rates seem to be pretty high over the years, peaking in ~1991 at 22.9% for a 12-month COD.

From wikipedia:

I don’t have any explanation for the 90% certificate, but I think you severely underestimated the amount of inflation in the Greek economy back in the 80’s and early 90’s.

4

Thanks for the link. This is from the Central Bank of Greece so I guess it is as accurate as it gets.

As for the inflation numbers, I do not know how they are calculated, but it definitely wasn’t as bad as it sounds, at least in everyday life.

5

Wouldn’t they have been charging equally high interest rates to borrowers? My parents told me that their first mortgage was something like 19%. Banks are just middlemen, taking a cut. They hold your money, lend it out to someone else in the meantime, charge that person interest, and give some of that interest back to you for letting them lend out your money. So higher interest rates for borrowers equals higher interest rates for savers.

Hmm this is GQ maybe I shouldn’t have posted that since it’s not factual at all… sorry. So consider it more of a question on whether this is how banks work.

6

Yup. From the bank of Greece site I linked to above, short term loans to corporations were 29.5% during the same year ('91).

7

I kinda remember that it was really hard to get a loan approved back then so many people and even reputable corporations would turn to loan sharks for financing. I’ll ask my father for details.