I call BS.
The Fed can do jack besides scare everyone.
a) There is demand inelasticity on certain things like oil as the economy is in full swing. People need to drive to work, fly/ship for business, produce plastic/material, keep their business powered. There is some elastic demand sure, but given the state of savings, that is hard pressed already.
b) Oil supply is not improving. There is OPEC+ that is making significant profits. Russia is making double profits from EU and India right now -- different conversation. It is a monopoly during war.
[b') Ukraine is out of the picture with its natural gas opportunities for the next 5 year at least. Similarly, Greece.]
c) Due to the scare for negative oil futures and the unpopularity due to the climate impact, smaller investment on new oil production experimental does not look promising.
d) U.S. oil companies have clearly stated they are going to not alter their oil output in any way to drop favorable prices, they are going to pass their earnings to their investors.
e) China, the supplier of the world, is experiencing significant issues and they are trying to stay afloat and not have a real estate and society collapse while keeping up with their zero covid policy.
f) Shipping is experiencing issues continuously during these unstable times, including piracy --
https://www.msn.com/en-us/news/world/iran-urges-greece-to-co...https://www.ft.com/content/37bb01c2-8b54-45d4-a93c-215514092...
g) China, and other countries, is actually reducing interest rates faster than U.S. is increasing them.
On items b-f Fed has zero power. By increasing interest rates hard, they are affecting (a) but due to inelasticity that means that the cure will certainly kill the patient. (g) might undo the actions of Fed and drive capital to real estate. Increasing rates might also actually increase housing prices and demand counterintuitively, as mortgages become harder to procure and recession forces people to sell, thus companies that buy houses in bulk in cash like Pretium get to gain a monopoly of the market and drive prices up.
interesting summary. It actually seems that if there is going to be a long process of reshoring manufactured goods it would make sense to keep rates as low as possible to support the long term investments needed
On items b-f Fed has zero power. By increasing interest rates hard, they are affecting (a) but due to inelasticity that means that the cure will certainly kill the patient. (g) might undo the actions of Fed and drive capital to real estate. Increasing rates might also actually increase housing prices and demand counterintuitively, as mortgages become harder to procure and recession forces people to sell, thus companies that buy houses in bulk in cash like Pretium get to gain a monopoly of the market and drive prices up.