Looks like there might be another wonderful day in the market tomorrow. A few weeks ago, I posted a message predicting the fed's current penchant for raising rates leading us to another recession. This banking entity now seems be be in a state of panic and, in its mistaken assumption that higher rates will cure our economic ills, is likely to take draconian actions that will completely derail the U.S. economy, leading to long-term stagnation. Now we are also seeing a chorus of economists sounding the alarm about federal reserve's likelihood of raising interest rates too high too soon as well.
Inflation is clearly a world-wide phenomenon; the pandemic has been its catalyst. That is why it is so pervasive and deep-seated. There will only be improvement when the pandemic dissipates, with supply chain issues resolved and workers returning to their jobs. In its ill-advised attempt to "tame" inflation at any cost, the fed believes that, by destroying the market and raising rates on debt-ridden individuals, it can bring the prices down and create financial stability. Higher rates--at the pace they're envisioning-- on car, credit card and home loans, in conjunction with a languid stock market, will swing the pandulum to the other exrteme, ultimately causing serious stagnation. What kind of solution is that?
A year from now most of us will be talking about the fed's collosal mistake in excessively raising rates in its quixotic attempt to bring order to existing financial disarray, a herculean problem it is possibly incapable of resolving with its current strategy.
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