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Every hiking cycle over the last 70 years ends in recession or a financial crisis.

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libertybele:
Every hiking cycle over the last 70 years ends in recession or a financial crisis.

One of the mysteries for the first two months of the year was the fact that the U.S. economy was seemingly absorbing a wave of Federal Reserve interest-rate hike without a hiccup.

After the events of the last two weeks, that notion can be put to bed. “Every rate hiking cycle of the last 70 years has ended in recession (c. 80% of the time) and/or a financial crisis (in 1984 and 1994),” says Graham Secker, chief European equity strategist for Morgan Stanley in London.

“A week ago it was possible to argue that this observation was theoretical, now we know that it is not going to be different this time,” he added.

His comments came after three U.S. banks have collapsed, as federal authorities organized major banks to deposit $30 billion into First Republic Bank FRC, -25.19% to stave off a fourth. Credit Suisse shares CSGN, -8.01% meanwhile have slumped 22% this week on worries for its survival.

Secker did note that financial crises don’t always lead to economic recessions, as evidenced in 1984, 1987, 1994 and 1998. “However, at this stage we think markets will run with the ‘guilty until proven innocent’approach given: 1) the prospect of a material tightening in credit availability and lending standards from banks after recent events;2) the deeply inverted yield curve going into recent events,” he said...............

https://www.marketwatch.com/story/every-hiking-cycle-over-the-last-70-years-ends-in-recession-or-a-financial-crisis-its-not-going-to-be-different-this-time-morgan-stanley-strategist-says-f5fddea2?mod=home-page

Kamaji:
Of course, because the rate lowering that precedes an rate hiking always goes too far down, the rates are held too low for too long, and the rate hiking, when it finally comes, is accelerated to the point of causing harm precisely because it wasn't started early enough in the cycle.

LMAO:
And interest rates are rising while debt to GDP ratio is well over 100%

We are heading into uncharted waters. This is precisely why conservatives favor spending cuts and entitlement reforms. Without them, this economic uncertainty will become more frequent

Borrowing was encouraged while rates were low and, to paraphrase a previous president’s pastor, our chickens are coming home to roost

Kamaji:

--- Quote from: LMAO on March 17, 2023, 02:12:33 pm ---And interest rates are rising while debt to GDP ratio is well over 100%

We are heading into uncharted waters. This is precisely why conservatives favor spending cuts and entitlement reforms. Without them, this economic uncertainty will become more frequent

Borrowing was encouraged while rates were low and, to paraphrase a previous president’s pastor, our chickens are coming home to roost

--- End quote ---

:thumbsup:

jmyrlefuller:
Well, yeah.

That's the whole point of "hiking cycles." To trigger a recession.

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