OPINION: This is what happens when government floods our economy with easy money
Sen. Ron Johnson, R-Wis., rips Biden's proposed budget, arguing his plan increases taxes, spending, and deficits on 'Varney & Co.'
Naturally, this has put a strain on household budgets. For almost two full years now, prices have been rising faster than wages, causing hard-working Americans to fall further and further behind, despite a relatively healthy labor market.In response to rising inflation, the Fed started raising interest rates, which had been at near-zero from December 2008 to December 2015, and then again from March 2020 to March 2022.
People line up outside the shuttered Silicon Valley Bank headquarters on March 10, 2023, in Santa Clara, California. SVB’s predicament is not unusual, although it’s not typically fatal. The bigger problem is that SVB’s collapse sapped– and confidence is the key component undergirding the entire financial system.
In the long run, banks will adjust to higher interest rates. In the short term, however, there are likely to be additional dislocations that further jar the economy. Any hope of a "soft landing" has now been thoroughly dashed. The trouble is, we still don’t know how all this will play out. Recession is now increasingly likely, and with it we can expect a downturn in the labor market – which means higher unemployment and slower wage growth.
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