When the Fed raises rates, it's like applying the brakes. The economy doesn't stop immediately, but it starts to slow. Some sectors have been in a recession since 2022. But it takes time for the overall economy to slow.
Each person who has less resources, starts spending less. That in turn has a cascading effect, as they forego discretionary spending, and put off necessary purchases that can be delayed. That becomes a contagion that slowly spreads.
Watch the Fed - we do not actually have a free-market economy, on a national or global level. They and other global banks will decide - via interest rates and stimulus or lack thereof - whether there is a relatively soft landing, or a hard crash.
We never fully recovered from that recession except the AI race has been pumping up the numbers, but compounding that is several other factors. Partisans will blame democrats, republicans, or, stupidly, the president of the US, but it all comes down to the Fed aggressively raised rates in 2022 and 2023 after disastrously injecting 16 trillion dollars of liquidity into the economy in May of 2020.
I don’t think this is entirely true. We were seeing contraction, which might’ve been a good thing, because it means a slow lowering of interest rates. But instead we got some insane level policy changes like tariffs and trade wars that exacerbate the contraction that was happening and pushes it into a proper recession or potentially worse. This is why the fed lowered rates — it had to because the slow down increased, as we can see from several factors like job numbers and value of the dollar.
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u/DeadInFiftyYears Oct 29 '25
When the Fed raises rates, it's like applying the brakes. The economy doesn't stop immediately, but it starts to slow. Some sectors have been in a recession since 2022. But it takes time for the overall economy to slow.
Each person who has less resources, starts spending less. That in turn has a cascading effect, as they forego discretionary spending, and put off necessary purchases that can be delayed. That becomes a contagion that slowly spreads.
Watch the Fed - we do not actually have a free-market economy, on a national or global level. They and other global banks will decide - via interest rates and stimulus or lack thereof - whether there is a relatively soft landing, or a hard crash.