Wall Street Silver: The Fed Is Paving a Path of Destruction
The economy has been slow all year, with the first two quarters of 2022 showing a decline. Historically, that’s been the definition of a recession. And with many big tech companies announcing the layoffs of thousands of employees, it’s clear the slowdown continues.
In the meantime, the Fed continues to raise interest rates, which could further erode the economy in the months ahead. This destruction could potentially become much more obvious before the policy of destruction ends.
Measured in real, inflation-adjusted terms, GDP has yet to reach its pre-2008 levels. While higher in nominal terms, the housing crash, Covid crash, and now high inflation have kept the economy back.
Recent years have seen the economy fail to get back to a post-war average of 2-2.5 percent annual GDP growth. With each year that growth doesn’t occur, there’s potentially trillions of potential wealth that isn’t being created.
Now, with rising interest rates, incremental prosperity is being destroyed. And the Fed’s policy of slowing the economy can only be achieved by increasing unemployment.
In the meantime, rising rates are impacting global debt levels. Rising rates mean a far higher cost to service debt, which in turn can impact trends such as government spending and tax rates.
As long as rates continue to rise, expect market uncertainty and volatility to continue.