What would happen if the Fed actually went full Volcker and raised interest rates to 5% in June and then 10% in July?
Inb4 midwits start shouting "nooo they won't/can't do that". Let's discuss what happens in the unlikely event that they do decide to go through with it
They should.
The whole "soft landing" shtick is retarded, you want the crash to be as short as possible instead of a long bleeding.
That’s what Bill Ackman is urging them to do. The slow approach is not going to be sufficient to deal with runaway inflation, but maybe that’s their goal
25% housing crash
Nasdaq would be down like 80-90% from the top. Bitcoin would be low 4 figs again, maybe even 3 figs if shit got really bad. Housing would drop like 50-60%. It would annihilate the markets for the next 10 years but we would come out with a healthier economy on the other side
I agree with raising them to hell. But that raises a question.
Forgive my ignorance but wont US debt become insolvent after a certain point of interest?
Wouldnt raising taxes in tangent with raised rates also help push back inflation?
It would likely lead to more consolidation of asset markets. At a 40-60% housing correction a ton of corporations sitting on cash will hoover up houses.
They don’t have to keep the rates that high for very long. Just momentarily to pop all the bubbles and get inflation under control, then lower the rates again to restart the game and make sure they don’t default on their own national debt
Fucked if you do, fucked if you don't
If you let it fall too quickly you cause a liquidity crisis which compounds deflation and then creates a deflationary cycle in the markets, drawing the bear market out longer than it needs to be
If you try to land it softly then you just drag it out anyway but run the risk of not deflating the market at all if it calls your bluff and prices it in
Consumer inflation would be contained for the year and everyone would smile nervously because the money supply still didn't go down.
The US would be unable to pay interest on its debt. USG defaults, world economy goes into chaos and the dollar either decouples from its burger host or dies as a world slavery mechanism.
Lol delusional hoomer. The whole point is that at 10% interest rates, there is no reason to own equities or homes, because you can make good money in savings accounts and bonds. We've been in a 40 year cycle of declining interest rates for so long that people forget that money has value. Dollarchads and bondchads will rule the world.
at 10% interest rates there is no reason to finance homes or equities. Cash prices are sufficiently low that outright ownership becomes preferable and rents are more than enough to return sufficient value.
Well that’s what happens in every boom-bust cycle. The only ones who can afford to slurp the bottom are those who are already rich
you can slurp stuff if you are not rich or if you are thinner on cash than the average, you just need to be sharper and find assets that aren't going to sell at any price. You can very regularly find them if you are aware of what doesn't easily sell in your metro.
I should have specified that i meant in any meaningful amount. Of course everyone can slurp a few thousand dollars worth of assets, but at the bottom when credit is tight as hell, the only ones with access to serious capital to slurp are rich people/corps. Every cycle widens the wealth gap
you can find credit to slurp, you just don't get to use cheap credit. hard money guys are almost always lending at some amount of interest how do you think they get their nut.
>The only ones who can afford to slurp the bottom are those who are already rich
What about the ones who aren't rich, but timed the market? (Me)
it would result in me furiously stroking my dick and laughing my ass off at the boomers around me
they will never do that unless some emergency happens that deserves panic
such a large bump will lead to unpredictable consequences and they cant afford that
Nobody thought Volcker would do it either but he did it because it was necessary. Jpow has said he admires Volcker and that he will not rule out following in his footsteps if necessary. Being a fed chair is not a popularity contest. Their job is to do what is best for the economy even if that means normies will regard them as the devil for a couple of years
rates will not solve anything that we're seeing right now
jpow himself said that several times if we're going by what this guy says as gospel
This is dangerous because you don't know how long it will take to fully pop it
The whole reason they are raising rates and QT is to attempt to combat inflation. If it doesn’t work as expected, they might very well give the economy the shock treatment it needs by pulling a Volcker
Inflation is based
Only midwits hate inflation
Meanwhile smartfrogs get shit rich
it’s dangerous but it’s honestly the least dangerous out of all the options on the table. the other options are pretty much ensured destruction of the economy and/or the USD