Can anyone explain to me how come we are about to hit recession when there is an incredible demand (as in people have the money and want to spend them) for everything (furniture, appliances, anything really..) but there's no supply?
Non-asset holders (read: bottom ~70%) do not have money and cannot stomach inflation.
Unfortunately, the data shows that most Americans are not SWE's pulling $180k from the comfort of their newly renovated living room for the last two years.
...except the fed doesn't have the authority to enact hiring freezes. They can raise interest rates which might cause hiring freezes, but it's also a policy tool with wide ranging effects so saying inflation is being "dealt with with hiring freezes" is still a bad characterization.
The article is about leadership in financial institutions choosing to interpret the Fed's policy and rhetoric about inflation as "hiring freezes to reduce inflation caused by rising wages and employment rates, please". I didn't say that the Fed is forcing anyone to do anything, just that there is a concerted effort to portray a cause and a solution to inflation in a certain way, seemingly coming down from the Fed.
Well, demand is high and supply is constrained. This has caused a spike in inflation. It’s a good question whether interest rates should be used to counter this. In order to counter this interest rates are going up, this reduces the attractiveness of the stock market causing a crash- as you’ve seen in the main indices. But on top of that inflation is high in energy and Putins war is going to spike food prices. High interest rates also encourage people to save instead of spend which will put a headwind on spending.
So we’re moving into a situation where consumers are going to be spending a lot of their income on mortgages, rent, fuel and food. Whilst the supply chain may ease supply, discretionary spending looks likely to tank.
Economists like to say "the cure for high prices is high prices." High prices should reduce demand and also increase supply. I don't see how this necessarily leads to a recession (a contraction in the economy) which is usually caused by fewer people working. We have record low unemployment. A lot of people are just parroting political talking points at this point about the inevitability of a recession, there is no indication yet of one AFAIK.
The Fed is going to raise rates until something breaks, and a recession or "hard landing" is just the likely cost to be paid. It's a healthy part of the business cycle, and closer to an intentional policy outcome than something that is just happening out of nowhere. The excesses of the past decade are exemplified by the tech industry and it will likely be disproportionately impacted.
