It seems in interest rate markets there are now more bets on multiple 75-basis-point rate this year. That is not the consensus but it is good to see this is the way the Fed might move. Moving rates to 2.5% by the end of the year is a complete joke. Much more aggressive action is needed the massively reduce the liquidity in the market.
More aggressive action would lead to a recession, many economists are worried that even as far as the Fed will go could lead to recession. Rates need to go up yes, but it needs to be done gradually so that economic growth does not slow too much, all at once.
For me, a recession is a feature and not a bug. A recession will allow for labor and capital engaged in value-destroying activities to be reallocated to value-creating activities. Right now we have a situation where you are paying people to borrow money (in after-inflation terms.) The longer this goes on the greater the economic distortions and worse the long-term economic growth prospects will be.
The sad (but inevitable) fact is that in the long-term a recession of some kind is inevitable. Dread it, run from it, market distortions (and excessive debt) bring recessions or even depressions all the same. In that way, they are more akin to forest fires than anything else. Recessions are part of the economic cycle. It's better to have several small ones than one big one.
Of course, what is most likely to happen if we have another recession is that the government simply puts boatloads of money in the hands of corporate America - again (not like they didn't already do that during corona). Essentially, that is corporate welfare. And it's funded by us, John Q. Public, whether we will it or not. I'm not necessarily hostile to that, because stability could be quite desirable here, but it's not exactly without downsides either.
