3 ms·
The Fed had to know that as they kept pushing, more serious stress would show up in the financial system as they went higher. This is exactly what they have bee
by adventured 4y ago
The Fed had to know that as they kept pushing, more serious stress would show up in the financial system as they went higher. This is exactly what they have been looking for. To the Fed this means what they have been doing is working (their goal has rather openly been to slow the US economy, and to a lesser extent the global economy, to bring down inflation via demand destruction). Nothing quite brings economic growth to a halt like a large banking crisis and the corresponding panic.
- nemo44x 4y agoYeah but this could be an instance where the cure is worse than the disease.
- adventured 4y agoI think it's very likely to be worse (certainly drastically more risky). The Fed has a history of hard landings. There was a level at which more modest rates would have gradually bent inflation downward over time, and it would have taken a while (a year or two longer, say). IMO the Fed was too aggressive in trying to stop it asap. They went too far too fast and we'll see a rolling fallout from it for several years yet. Lower rates with elevated inflation for a bit longer, would have been the more prudent choice, than cranking the volume fast and risking a financial crisis.