Flacco, I was a teenager in the 1970's and can tell you that the economy in the 70's was anything but a roaring economy, in fact it was completely abysmal from at least 1972 until about 1982. The high interest rates during the 70's were not a result of an roaring economy at all as there was stagflation, which a combination of high inflation despite a stagnant economy. The causes of the stagflation were many....but some of the factors included the attempt to juice the economy in the late 1960's and early 1970's with very low interest rates to counter a recession under LBJ (which was great for my parents who bought a house in 1968 with a 4% mortgage) and to insure Nixon's re-election in 1972. Nixon further spent like crazy to try to juice the economy and all of this lead to inflation and huge government deficits, which forced the government to abandon the gold standard for the dollar, which caused more inflation, followed by the first oil shock in '72 or '73, which caused even more inlfation and just completed killed ceconomic activity. Additionally, the wind-down of the Vietnam war killed more economic activity (along with piling up more debt) and Nixon's disasterous wage and price controls further distored the economy and further killed economic momentum. In the meantime, the American railrod system was in the process of comletely fialing after years and years of disasterous over-regulation (leading to Amtrak and Conrail and the Amercian auto industry went into the toilet as they were producing low quality gas guzzlers that no body wanted any longer due to the price of gasoline doubling overnight at the same time that much lower priced, much more fuel efficient Japanese cars started hitting the US market in large quantities. On top of all that, the US stock market performed abysmally with the S&P 500 losing something on the order of 50% on an inflation adjusted basis.
The only people who made out during the 1970's, were people like my parents, who had bought a home prior to the 1970's and had steady jobs that they did not get laid off from. By the time that inflation was brought back under control in the early 1980's, that house that my parents bought for $28,000 had gone up in value by a factor of 6 as they were able to selll that house for $175,000 in the mid 1980's. I will never forget looking at my parents mortgage statement in the early 1980's when I was home on break from college and noticing that the monthly escrow payment for the proeprty taxes and insurance exceeded the P&I portion of the payment as the stagflation of the 1970's had reduced the value of the mortgage debt to a pittance - the P&I portiion of the monthly payment was someting on the order of $110 and the taxes and insurance were about $140 a month.
