The really pedestrian explanation is that the Fed just crashes the economy into a wall. It doesn't really have a magic wand, it just creates a recession (and I

The really pedestrian explanation is that the Fed just crashes the economy into a wall. It doesn't really have a magic wand, it just creates a recession (and I've definitely argued with people on here who think the Fed has the magical ability to steer us around inflation and recessions without causing any kind of crisis--but I'm old enough to have heard all that about Alan Greenspan back in 1999). But then to completely switch gears and get even more technical about how raising interest rates results in a slowdown--the higher interest rates immediately raises borrowing costs for stuff like cars and houses and makes them more expensive. But at the same time there's a lot of bad business investment on the margins that rolls over their loans on a 1-2 year period (similar to an ARM on a house). Those loans are going to start refinancing at higher rates. When you look at stuff like the vacancy rate of commercial real estate in SF and Portland, those are going to have loans like this behind them which are only being propped up by low rates. As rates rise, the firms behind those properties risk going bankrupt and the ones at the margins will, which turns into losses for the creditor banks, tightening all kinds of appetite for risk and availability of credit. Those effects wash over the system creating layoffs and reducing demand for goods in a positive feedback loop--things like advertising spends also decline, hitting companies like Google and Meta. That's the actual cause-and-effect that creates the slowdown going from raising the cost of borrowing to financial problems at FAANGs. Of course the current round of layoffs is mostly anticipatory. They aren't really hurting yet, although they're certainly seeing their growth numbers start to turn down.