The Financier: This Crash Will Be Much Worse Than Expected

Inflation remains a top concern for the Federal Reserve. Their plan? Raise interest rates to slow the economy, and hence slow inflation. However, that plan also has the potential to throw millions out of work.

The problem? Jobs don’t cause inflation. So rising unemployment is no guarantee that it will solve the inflation problem. Inflation is caused by money printing. That exploded during the pandemic, and remains high today.

If anything, keeping more people employed helps fight inflation.

More workers increase the supply of goods and services on the economy. All else being equal, that should have a downward effect on price. Fewer workers means fewer goods and services, which would lead to a larger price increase.

Right now, markets are hyper-sensitive to how the Federal Reserve is reacting to economic data. That can create big swings in markets. But it’s also a sign that rising unemployment will be a sign for the Fed to declare victory and stop raising interest rates.

Typically, rising interest rates should lead to a change in consumer habits. Higher rates on saved capital in bank accounts or bonds should entice consumers to spend less and save more. However, the data shows that consumers are still borrowing as fast as ever.

With a slowing economy and record low savings rate, the economy could be in store for a larger drop ahead. Investors should look to build up cash now, to take advantage of post-crash bargains.

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