Tightening In A Bust

Posted By Darren Winters on Feb 23, 2023

Tightening In A Bust

Central banks tightening in a bust could worsen the economic recession and trigger depression.

Central bank monetary policy was intended to even out the boom, bust economic cycle. So during a recession, central banks would ease liquidity conditions providing a safety net to cushion an economy in free fall.

US GDP has fallen for two consecutive quarters – 1.6% during the first quarter of 2022 and 0.6% the next. Two consecutive negative quarters of GDP are the technical definition of a recession.

But numbers are just numbers, so let’s put on our walking shoes and hit the street. 

The cooked jobs data do not jive with reality on the ground. 

Subprime Auto Loan Delinquencies Hit 13-Year High, as mass layoffs over 60,000 in January was the worst in decades. 

Tech and financial layoffs are accelerating in February as the bulk of tighter monetary conditions with several 75 basis point hikes in 2022 are now being felt. 

Tightening in a bust

US households are on life support, of affordable credit, which is being restricted. 

So central bank tightening continues despite Amazon’s recent fresh round of 18,000 job cuts, the largest layoff in its history. Amazon is a yardstick of retail health. 

But it is not just ballooning auto repossessions; evictions are soaring. Goldman Sachs estimates that 750,000 households could face eviction before the end of the year, bearing in mind as many as 3.5 million households nationwide are behind in their rent payments.

The biggest bubble of all, the real estate bubble is bursting. The Southern California real estate crash is underway with plunging sales due to a 47% increase in mortgage payments, in a cost of living crisis with layoffs soaring.   

The latest fairytale; there will be no soft-landing the Fed is tightening in a bust

The current recession of the 20s could be worse than the 2008 Great Recession because central banks were easing liquidity conditions with near zero interest rate policy and asset purchases.  

To my knowledge, there is no precedent of central banks tightening in a bust. So, is this a case of central banks being wrong about everything and completely ineffective at fighting problems they caused?

Perhaps this coming depression is by design

What if central bankers are not stupid but playing stupid, spinning fairy tales for as long as possible?

Every game has a beginning and an end, and the western monetary system of boom-bust debt is in checkmate. 

A rival system in the East based on production and commodities is emerging. 

Two rival systems in an existential fight, where its outcome is decided not by leaders in bilateral summits but by Generals on a battlefield.

Central banks (central planners) tightening in a bust could be about diverting resources into a war economy

The economic depression, by design, converts Amazon delivery drivers into cannon fodder; it provides conditions for the economic draft diverting resources and capital from civil use to wartime production. 

It is the people’s blood, so the hegemon remains on the throne. 

I hope to be wrong. 

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