Something doesn’t add up. And at the core of this charade is the fact that the U.S. economy is hooked on artificially low interest rates. You see, the damage from the previous rate hikes and balance sheet reduction is already done. For one, the cost to service debt has gone up across the board. And that could be fatal for many companies and entire industries that have grown dependent on artificially low rates. After nearly six years of 0% interest rates, the U.S. economy is hooked on easy money.
It can’t even tolerate a modest reduction in the Fed’s balance sheet and 2.25% interest rates, which are still far below historical averages. And we’re already seeing this take its toll in industries most dependent on easy money and 0% interest rates – the housing and auto markets.