The “Mega-Bubbles” Have Started To Burst, And That Could Mean Unprecedented Financial Chaos Is Ahead

The Federal Reserve giveth, and the Federal Reserve taketh away.  In a desperate attempt to help the U.S. economy recover from the horrific economic crisis of 2008 and 2009, the Federal Reserve pushed interest rates all the way to the floor and kept them at or near the floor until 2022.  During that same time period, the Fed also created trillions of dollars out of thin air and pumped it into the financial system.  All of this new money had to go somewhere, and it created colossal financial bubbles that were unlike anything we had ever seen before.  There were a few voices that were warning that all of this foolishness would end very badly, but those voices were mostly drowned out by those that were super happy that asset values were absolutely exploding.  The Fed had essentially created the ultimate “get rich quick scheme”, and countless Americans were more than happy to take advantage of it.

But in 2022 inflation started to become exceedingly painful, and the Federal Reserve went into panic mode.  The flow of free money stopped, and the Federal Reserve began to aggressively hike interest rates.

Everyone knew that this sudden change of course by the Fed would crash the housing market, and that is precisely what is happening.  In fact, even the Wall Street Journal is now admitting that we are facing “a housing slump as severe, by some metrics, as that of 2007-09”

The Federal Reserve’s interest rate increases have brought on a housing slump as severe, by some metrics, as that of 2007-09, inflicting pain on prospective buyers, homeowners, builders and other industries linked to real estate.

For the Fed, this is a feature, not a bug: Slumping housing could help deliver the lower economic activity and inflation that the Fed wants in the coming year.

Home sales have been falling month after month, and it is being projected that they could soon fall below the levels that we witnessed during the last housing crash…

Sales of existing homes fell in November for a record 10th straight month. Economists at Fannie Mae and Goldman Sachs forecast they will drop below 4 million in 2023, lower than during the 2006-11 housing bust.

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