posted ago by dukey ago by dukey +30 / -1

So after the 08 financial crash, the Fed cut interest to basically zero then did 3 rounds of QE (huge money injections). 0% rates has really drastically changed the economy in the past decade. House, land, stock prices are all through the stratosphere thanks to the cost of money being so cheap. It's been dubbed the "everything bubble". These bubbles can only last on the assumption of super low rates. In 2019 the Fed tried interest rate normalization, ie the economy was doing great, everyone was employed so there was no need for 'emergency' interest rates anymore. Well this normalization only lasted a few months before the stock market started to implode. The fed quietly and quickly went back to QE (money printing) to stabilize the economy. Then literally within 3-4 months covid happened. And once again to stabilize the economy they printed massive amounts of money, and cut rates back to nearly zero. In fact over 18 months they expanded the money supply by something like 25%. The money supply literally exploded. This excess money will be chasing up the value of goods for years unless it is taken out of the economy. It's why inflation is out of control.

So to cut to the chase. The fed has a choice, either they raise rates and fight inflation, or they carry on at 0 and let the dollar be destroyed. It looks like they are going to save the dollar, but this means all these bubbles that have been inflated over the past 12 years will be destroyed. It could potentially be a violent unwind.