Well in the least surprising move in the history of the world, the Fed raised interest rates. Now the fun begins.
In this video I discuss how we are now to mirror 2018. We saw this party before and how it ends. The unfortunately thing is we are in much worse shape economically as compared to the last time.
The Fed is playing the expectation game. We are now going to witness how things reveal themselves. Did we move into certainty regarding a recession in the second half of the year? I believe so.
▶️ 3Speak
Doesn't increasing rate increase governments debt which is already at an all-time high?
well, I do agree with your analogy. An increase in the price of commodities redirects people's spending habits (and they are not neccearily saving). Here in Nigeria, inflation is at an all-time high. People can barely afford certain luxuries anymore and it disturbing a lot of businesses and industries.
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Raising rates could apply to the servicing of debt. What is issued is locked in. However, since governments arent going to stop, issuing new debt would be at a higher rate, raising their servicing costs.
However, that is if rates go up in the market. Looking back, the last two times the Fed went down this path, 2013 and 2018, rates went up for a while then went down.
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Raising rates now won't really help much now. It makes more sense to raise rates when the economy is good because people can absorb the costs. But right now, there really isn't enough room for people to absorb the costs. It will just hit discretionary spending and hurt the economy.
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It seems likely, we will see, hopefully crypto will provide some protection/hedge, but consumer spending will not go down, but purchase power will.
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Well if we get a powerful recession, even a depression, purchasing power will end up going up. People do not even realize a deflationary environment when it smacks them in the face.
Everyone talks about inflation. Look at the latest CPI report and there are some things starting to already crack. We go into a bad enough recession, Russia's oil being removed from the market wont matter since demand will crash.
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That's true.
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In crypto we trust. 👨💻👍
I believe we're gonna have a global recession, it's not just in the USA. I still don't know exactly, though, what's the difference between recession and stagflation..
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Stagflation is a flat economy with persistent inflation. Hence, the economy sucks but prices are still going up.
Many talk about that but I dont see it happening in this era. To start, the last time we had that in the US (in the 1970s) the Boomers were entering the workforce. Now they are exiting.
Stagflation will quickly turn to deflation in my opinion.
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Let's hope not, friend, economic recessions have never been good, but there are always those who can take advantage of all the factors involved. Cryptocurrencies could play an important role and allow us to be a balm.
Sadly I think hope is going. In my mind, I think it is almost a set outcome. There is no way to really avoid it.
Things were contracting to begin with. Now we are going to see even more headwinds.
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The inflation in the US seem to have been out of control. Attemps to curb the inflation will probably cause a recession.
Yeah well since the ones trying to curb it didnt cause it, the odds are it will not happen.
What will curb inflation is the demand side of the supply chain shock altering. This will mean the supply shortages are not there since demand changed.
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Raising rates by a couple of percentage points should have been factored in when buying property except that we now have a lot of younger people (under 60's) suckered into the housing ladder BS and with massive credit card debts.
They are too young to remember interest rates at 18% as happened in the 1970's UK housing market. Plus the Saudis raising the price of oil fourfold overnight.
The odd thing in this scenario is that as fiat devalues they see house prices rising and think they are on a winner? Dumb.
They don't understand inflation or that house prices relatively actually fall?
Retail and commercial property is screwed. Many office blocks in London are being converted to 'luxury' flats (apartments)?
Who in their right mind would buy into such a toxic deal? The young and dumb.
In the 70's we had a 3 day week for those that had a job and electricity was cut off for most of the day causing chaos for refrigeration at home and in firms. Total fiasco.
Londoners were going apeshit and the country rebelled by voting in Margaret Thatcher and we know how that ended...right here. Right now.
This chaos has it's roots in moneterism and the dogma of greed is good.
My advice? Buy crypto.
That is all true although in many ways the currency is not being devalued. People like to state that yet they are overlooking all that people use to pay for that is now free.
The housing situation is due to the fact that we all urbanized. The push to the cities sent prices screaming. Of course over leveraging globally is also a problem.
Many are screaming and whining about inflation. They never truly experienced deflation. Just ask those who remember the Great Depression how a deflationary environment really is.
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In this Macro Moment video, the speaker discusses the recent decision by the Fed to raise interest rates for the first time in nearly four years, despite ongoing geopolitical tensions in Ukraine. The speaker expresses concerns about the potential economic impacts of the rate hikes, particularly in light of existing challenges such as supply chain issues, high commodity prices, and limited wage growth. They predict that these factors could lead to economic headwinds in the latter half of 2022, potentially resulting in a contraction of GDP and increased unemployment. The speaker also mentions historical trends related to interest rates and mortgage rates and highlights the uncertainty surrounding future economic conditions.
Detailed Article:
The video opens with the speaker addressing the audience and introducing the topic of discussion: the recent interest rate hike by the Federal Reserve, dubbed as Happy Rate Height Day. They emphasize that this decision was not surprising, as it had been well-advertised. The speaker expresses skepticism about the Fed's reasoning for the rate hike, attributing it to perceived inflation created by the Fed, even though supply chain issues, high wheat and oil prices, and semiconductor shortages persist.
Furthermore, the speaker raises concerns about the potential consequences of the rate hike, particularly its impact on individuals' savings, wage growth, and overall economic stability. They point out that despite a decrease in the unemployment rate, many have left the workforce, resulting in stagnant wages for a significant portion of the population. The speaker also warns about the challenges posed by increasing debt loads and the potential for higher costs of servicing this debt due to rising interest rates.
The discussion then shifts towards predicting future economic conditions, with the speaker highlighting indicators such as China's slowing growth rate, stagnation in the real estate market, and growing inventories as potential precursors to economic headwinds in the latter part of 2022. The speaker argues that elevated prices in essential goods like energy and food could lead to reduced consumer spending in other sectors, ultimately impacting GDP and leading to unemployment as companies cut costs to maintain profit margins.
Moreover, the speaker touches on historical patterns related to interest rates and mortgage rates, urging caution in presuming a constant upward trend. They caution that while there might be short-term increases in rates, the long-term trend could revert. The discussion closes with a mention of stagflation and the possibility of massive deflation in the event of an economic downturn, concluding with a wish for a great day and a hint at future content.
Overall, the video provides a critical analysis of the Fed's interest rate decision, highlighting potential risks and challenges in the current economic landscape while also shedding light on historical trends and uncertainties regarding future economic conditions.