The Fed Conundrum and the Housing Market CollapseThe Fed money tightening policies are using interest-rates as a lever to fix a balance sheet problem.
Higher rates feed right back into the CPI, initiating the doom loop.
After the financial crisis of 2008, The Fed employed a policy action to reduce the federal funds rate to a range of 0-0.25% for seven-(7) years, during which time the CPI fell.
Post-pandemic (COVID), the CPI is 97% correlated to the Fed balance sheet.
Looking historically, in 1980's, the Fed Rate was ~19% (real rate was 8%). Compared to today, the Fed Rate is under 3% and Real Fed Rate is at -6%.
Folks already crying about a 3% Fed Rate.
A colossal policy error in the making, or is everything going "according to plan"?
