[grey-area]

But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.

There will not be a soft landing.

When has there ever been a soft landing and how would raising rates into a recession ever result in one? Raising rates takes 1 year to come through to the real economy - we haven't even seen the impact yet, only on stock prices which foreshadow the real economy and again are a leading indicator. They will raise till unemployment starts to rise.

Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away.

[idopmstuff]

> There will not be a soft landing.

The reality is we cannot see the future of our incredibly complex, ever-changing economy. Sure, this hasn't happened in the past, but on the other hand the economy today is vastly different than it was even fifty years ago. Not to say we couldn't end in a recession - of course that is a distinct possibility - but the reality is that we don't have a ton of history to draw on when it comes to post-pandemic recessions exacerbated by supply chain issues and large-scale war in major energy-producing countries.

I wonder if you've shorted the equities markets to the greatest degree practically possible given your financial situation? If not, then I think you're phrasing things with too great a degree of absoluteness.

In terms of the Fed's goal, it is reduction of inflation. Unemployment is both a driver and a signal of that, but it's not the ultimate goal. And besides, a rise in unemployment doesn't guarantee a recession - we're at 3.5% and folks from the Fed have said they see 4% as consistent with keeping inflation stable at an appropriate level. It is absolutely possible to have 4% inflation and not be in a recession.

[grey-area]

I don't short stocks, but I would not buy the US market at the moment. There will be bear market rallies but I do think this is still a bear market and will take years to play out.

High interest rates causing unemployment and reducing investment is the lever they will use to defeat inflation, it's very very hard to get right and the Fed has a long track record of getting it absolutely wrong (including over the last decade when they stoked a massive asset bubble in the US and all sorts of crazy behaviour like NFTs and crypto speculation). I suspect they will get it wrong this time too.

The Fed created this bubble (and arguably others since 2000) with loose monetary policy, and now they're trying to kill it with tight monetary policy - what could possibly go wrong!

[notch656c]

>I wonder if you've shorted the equities markets to the greatest degree practically possible given your financial situation? If not, then I think you're phrasing things with too great a degree of absoluteness.

The equities market doesn't have great correlation with the common pleb's job outlook so it makes no sense to short the equities market based on these kind of predictions.

[idopmstuff]

The prediction was that we are guaranteed to go into a recession. Are you suggesting that we might have a recession in which the stock market doesn't decline? Bear in mind that this is a situation in which we can be sure the Fed will not prop it up, since they're the cause of it going down in the first place.

If we're making predictions about recessions based on history, then it seems pretty clear that the result of one will be a market decline.

[californical]

I think the issue is that we’re already in a recession, everyone has been talking about this for months, and the stock market has taken a giant turn downward already last year. It could stay at its current level for a year or two before rising again, but the stock market has already been expecting a recession and that’s likely why it’s this low already.

It doesn’t have to drop more in a recession because it already has! People losing their jobs and spending less is already predicted by Wall St.

[idopmstuff]

Plausible, but if this is the worst it gets, wouldn't we call this a soft landing?

[notch656c]

Apologies for not being clear. I was referring to this quote which you quoted.

>But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off. There will not be a soft landing.

It seemed like you were responding to this statement that was about employment rather than the stock market, before making your comment about shorting the equities market.

[htkibar]

End goal seems to be the eradication of newly emerging middle class, and to tilt the scale to workers' disadvantage.

Huzzah. /s

[lumost]

Tbh it does feel This way. The fed seems to be pursuing a policy where asset prices cannot fall and wages cannot rise. This is a path to feudalism.

[P_I_Staker]

This is a classic, desperate hope that people have going into a recession. "This time could be different". We've been waiting a long time for this one. It's not just about COVID, otherwise why would it happen as things get better.

Many of these businesses being hit were long overdue for a fall and behaving highly irrationally. This borders on the severity of the .com bust, though it does appear to be less severe.

How do we know it won't be worse either? We could be heading into a downturn and turmoil to rival the great depression.

[idopmstuff]

> This borders on the severity of the .com bust, though it does appear to be less severe.

I don't think this is remotely true - the .com bust killed off a huge number of companies (and an enormous amount of market cap) that weren't profitable and had no real path to profitability. This time we're talking about layoffs at companies like Meta and Amazon that are just throwing off money every quarter.

[pyuser583]

I have a pretty good memory three recessions.

All had massive amounts of domesday comparisons to the Great Depression.

None came close.

Irrationally businesses being hit hard is a normal part of the economic cycle.

The big question is “is this recession going to reveal some hideous flaw in our financial system we didn’t know about and couldn’t plan for.”

So far the answer is “no” - just like the dot com burst, and unlike the Great Recession and the bond crisis of the early 90s.

[Spartan-S63]

I really wish we had other tools than the Fed at our disposal. Legislation could be passed to create surtaxes on profits that exceed the current rate of inflation to help curb the inflation spiral. Likewise, we could pass legislation restricting the ability of private banks to grant lines of credit (so as to shrink the money supply on the supply-side rather than the demand-side). Either way, it would be nice to see the supply-side take a hit in this circumstance rather than the demand-side. Hit the asset-holding classes harder than the wage-earning classes. Ultimately, it's the asset-holding class that got us into this disaster in the first place.

[mullingitover]

> I really wish we had other tools than the Fed at our disposal.

The fed is basically a team of scientists when it comes to monetary policy, and meanwhile congress is essentially warring factions of drunk, catty sorority girls when it comes to fiscal policy. It's unfortunate.

If instead of the massive tax cut passed in 2017 we had passed a 2 trillion dollar infrastructure spending bill (and I'm talking 2 trillion in additional infra spending, not the watered-down "1 trillion" that included routine spending) we could've been on a solid footing for supply capacity that could've fought inflation without targeted killing of the working class.

[refurb]

Likewise, we could pass legislation restricting the ability of private banks to grant lines of credit

That’s already happening. Bank reserves are being tightened up. Plus banks do that anyways when economic outlook looks poor.

I think it would be terrible to legislate any of this. The fed is already under enough political pressure.

Can you image politicians trying to control the economy? They’d screw it up for sure.

[themitigating]

"Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away."

Why would this be a goal?

[yebyen]

The idea is I think that inflation is caused by too much money supply in circulation, caused by overemployment, and the only cure for that is less employment. It's a lot like how inflation and deflation are two sides of the same coin, but you wouldn't "root for deflation" because that's just the opposite extreme – Fed doesn't want everyone to lose their jobs, "just a healthy amount"

[Spartan-S63]

This the reality because there's no political will for Congress to act, so we're left the Fed to implement anti-inflationary measures. A sufficiently empowered legislature might attack this on the supply-side so that nominal increases in wages could become real increases in wages while discouraging the supply-side from increasing prices to rent-seek those nominally increased wages.

It sucks, but it is what it is. The rich keep getting richer and the poor keep getting poorer.

[refurb]

Price controls were tried in the 70’s and it failed spectacularly and often led to shortages. We had almost a decade of stagflation - poor economic performance AND inflation.

It wasn’t until the fed took control of the money supply in the late 70’s did inflation get under control.

[silisili]

The end goal is to reduce inflation. The goal of policy is to increase unemployment, which itself is a tool used towards the end goal.

This isn't conspiracy speak, JPowell has made this very clear.

[grey-area]

It’s the only lever the Fed has, so that is what they can use. They don’t have control of fiscal policy only monetary.