The 2023 United States banking crisis raises concerns about the effectiveness of the Volcker rules and the impact of quantitative tightening by the Federal Reserve. Some argue that the removal of money from the system through quantitative tightening should be given a chance to work, as it could potentially have positive effects on jobs and inflation. On the other hand, there are those who believe that quantitative easing, which added more money to the financial system for an extended period, necessitates further interest rate hikes.
While some argue that interest rates have already been raised high enough, there are signs that inflation is beginning to decrease. This has prompted suggestions to take a pause and observe the outcomes for a couple of quarters. The tech startup industry has already felt the effects, with funds reevaluating company valuations and layoffs occurring. Additionally, disruptions in the supply chain have influenced the pricing of lumber and resulted in more traditional prices. Car prices, both used and new, are also starting to come down.
One aspect that has received less attention is the potential legacy of Fed Chair Jerome Powell. While there were initial criticisms due to unemployment, Powell’s adherence to the Volcker rules brought inflation under control and contributed to a significant period of economic growth. The article highlights that few people argue that Powell went too far with his interest rate raises. However, the risk remains that if he did go too far, it would be challenging to prove the cause and effect of any negative consequences.
The article encourages readers to provide insights or studies on the impact of rate increases, particularly if they were excessive. It also links to a resource offering a detailed write-up on the 2023 banking crisis. In previous articles, the ongoing downgrades of US ratings have been discussed, attributing them to raised interest rates. These downgrades include those by Moody’s, S&P, and Fitch, affecting various banks and institutions.
As always, Brandon Jordan, Sr Vice President of ERA American Real Estate, provides additional information on his website and social media platforms for those interested in buying or selling real estate.
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