When the Tidal Wave Goes Out

[My views are my own]

“As a wave increases in height, its mass increases exponentially, as does the energy released when it breaks.”

Jon Krakauer in “Mark Foo’s Last Ride,” Outside magazine, May 1995 issue

2008 to 2021 was the most significant period of easy money (i.e., Fed Printing) of the Post-War era.

In March of 2022, the Federal Reserve commenced the most aggressive tightening cycle since Paul Volcker was Fed Chair.

As the chart below illustrates, in virtually every tightening cycle something REALLY BIG breaks in the financial system.

So far, crypto and disruptive growth have gotten clobbered. My instinct is that the de-leveraging in the system may just be getting started.

In addition, the backdrop for this Fed tightening cycle is weak real consumer spending, as I wrote here.

For a great recent book on the Federal Reserve, check out The Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leonard.

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