5 Minutes Ago: The Scary Truth Behind America

5 Minutes Ago: The Scary Truth Behind America

5 Minutes Ago – The Scary Truth Behind America
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The Fed Reserve increased interest rates. Of course, they had been promising to increase interest rates, and they delivered on that promise as much as the Fed claims. It doesn’t care what the markets do, it cares very much about what the markets do, and so it tries to craft what it does. With the markets in mind, we have so much more debt now than we had in the past.
It’s a whole different world. Just because the economy could survive 5% interest rates when we had a relatively small amount of debt to service, doesn’t mean the economy can also survive 5% interest rates when we have a mountain of debt to service both in a private and public sectors, but nonetheless is the biggest interest rate.
In 28 years, so it’s very rare that the Fed moves by 75 basis points. So after all these rate hikes, in a world where you have 8.6% inflation, interest rates are still highly inflationary, and so the Fed remains behind the curve. Despite this rate hike inflation is going to get worse. It’s not gonna get better, although Powell is prepared to.
That it will, but I think both consumers and investors are wrong with these expectations what was neutral in the past when inflation was under 2%? Is not neutral in the present when it’s over 8% because neutrality is supposed to be an interest rate that is neither stimulative to the economy, nor sedated to the economy.
It’s supposed to have no effect. Well, clearly an interest rate in a 2% inflation environment. Is gonna have a very different effect if you have the same interest rate in an 8% inflation environment. And so clearly, if 2% was neutral in the past, at a minimum, 8% would be neutral now, and we’re not gonna get anywhere near 8%.
And so the Fed is not gonna get anywhere near neutral. And if it’s not even gonna get neutral, let alone restrictive, what hope does it have of actually solving the inflation problem and returning the annual rate back down to 2%? It really was determined to make sure it eradicated inflation for good. It wouldn’t be talking about any victory claims simply because inflation was headed down.

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