Page 212 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

budge a single basis point for the next seven years. Three-month Treasury
yields stayed below 2% until the mid-1950s.
COBACOBA

The explicit reason for keeping rates down was to keep the cost of financing
the equivalent of the $6 trillion we spent on the war low.

But low rates also did something else for all the returning GIs. It made
borrowing to buy homes, cars, gadgets, and toys really cheap.

Which, from a paranoid policymaker’s perspective, was great. Consumption

became an explicit economic strategy in the years after World War II.

An era of encouraging thrift and saving to fund the war quickly turned into
an era of actively promoting spending. Princeton historian Sheldon Garon
writes:

After 1945, America again diverged from patterns of savings promotion in
Europe and East Asia … Politicians, businessmen and labor leaders all
encouraged Americans to spend to foster economic growth.⁷³

Two things fueled this push.

One was the GI Bill, which offered unprecedented mortgage opportunities.
Sixteen million veterans could buy a home often with no money down, no
interest in the first year, and fixed rates so low that monthly mortgage
payments could be lower than a rental.

The second was an explosion of consumer credit, enabled by the loosening

of Depression-era regulations. The first credit card was introduced in 1950.
Store credit, installment credit, personal loans, payday loans—everything
took off. And interest on all debt, including credit cards, was tax deductible
at the time.

It tasted delicious. So we ate a lot of it. A simple story in a simple table: