RATE HIKE –CONCERN FOR ECONOMYRECESSION

An inflation-driven recession is less severe than one fueled by credit, according to

historical trends.

If we exclude the pandemic-caused recession in 2020, other recent recessions have

been credit-driven, including the dot-com bust in 2000–2001, which was caused by

internet infrastructure, and the Financial Crisis in 2007–2008, which was caused by

excesses in debt that accumulated in the housing market. It took ten years for the

economy to recover from these two recessions.

The current recession is unique in that it is mostly the result of excessive liquidity

and a lack of debt, as well as the extreme amounts of fiscal and monetary stimulus

associated to COVID that pushed money into households and investment markets,

fueling inflation and financial asset speculation.

So, we may anticipate that the situation is not alarming and that the recession is just temporary.

Rate hike – Concern for economy recession

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