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The article is typical alarmist clickbait but there is some truth in there. Anyone with half a brain already saw there would be a crisis when the fed reduced r

The article is typical alarmist clickbait but there is some truth in there. Anyone with half a brain already saw there would be a crisis when the fed reduced rates to zero and started passing out stimulus checks to both people and corporates. Inflation was obvious but I didn't know the fed would do a 180 and started raising rate like Michael Jackson raising zombies. They obviously made a choice and it seems inflation was a big enough threat to slow the entire economy to a crawl. The responses to an event will always be lagging in the economy. Inflation took a few months to become a serious problem since Covid, the rate increases will likewise take a while to break stuff. Seeing how 2 giant banks already collapsed in the initial wave, it may indicate worse things are coming. I hope the fed realizes this and stop pumping the brakes.

Scoundreller 3y ago
> inflation was a big enough threat to slow the entire economy to a crawl. Naw, central banks saw wages starting to go up and that was their cue to act. But interest rates increases aren’t as effective of a tool against wages vs. commonly leveraged assets. If the central bankers acted when house prices started going to the stratosphere starting right in Jan 2020, rate increases would have been far more effective and wouldn’t have been as dramatic. Note that the inflection was before the pandemic was in full swing. They stood too long at the sidelines and lost control of the situation. https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA
- galaxytachyon 3y ago
  True. They waited too long. They cited "Covid Recovery" as the reason for all the stimulus in 2020 iirc but I wonder if it was only economic reasons that were responsible. It was election year after all.
darth_avocado 3y ago
This is a 100% fed driven problem. You have very low interest rates and you flood the economy with a lot of cash. The banks get higher deposits and they need to manage all this cash, what do you do? Long term “safe bonds” at low interest rates get destroyed when interest rates go up, so does the risky stock market and real estate (residential and commercial). Where do you park the money? Hold cash? You can lend it out, but again we’re talking about an all time low interest rate environment flush with cash, where the only demand for credit is from risky lenders. There was way more money with the banks than there was a need for credit. How else could the banks have mitigated the risk? I’m definitely not making excuses for poor decision making by some of these banks, but still. Even if you want to play it safe and do things by the regulation, how do you do it?

Scoundreller 3y ago

> inflation was a big enough threat to slow the entire economy to a crawl. Naw, central banks saw wages starting to go up and that was their cue to act. But interest rates increases aren’t as effective of a tool against wages vs. commonly leveraged assets. If the central bankers acted when house prices started going to the stratosphere starting right in Jan 2020, rate increases would have been far more effective and wouldn’t have been as dramatic. Note that the inflection was before the pandemic was in full swing. They stood too long at the sidelines and lost control of the situation. https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA

galaxytachyon 3y ago
True. They waited too long. They cited "Covid Recovery" as the reason for all the stimulus in 2020 iirc but I wonder if it was only economic reasons that were responsible. It was election year after all.

darth_avocado 3y ago

This is a 100% fed driven problem. You have very low interest rates and you flood the economy with a lot of cash. The banks get higher deposits and they need to manage all this cash, what do you do? Long term “safe bonds” at low interest rates get destroyed when interest rates go up, so does the risky stock market and real estate (residential and commercial). Where do you park the money? Hold cash? You can lend it out, but again we’re talking about an all time low interest rate environment flush with cash, where the only demand for credit is from risky lenders. There was way more money with the banks than there was a need for credit. How else could the banks have mitigated the risk? I’m definitely not making excuses for poor decision making by some of these banks, but still. Even if you want to play it safe and do things by the regulation, how do you do it?