Some folks have been saying for months that the Fed can never taper QE, that it can never raise rates, and that it can never shed its assets (QT), that in fact the Fed is “trapped,” and one of the reasons they enlist is the state of the consumer, that consumer credit couldn’t handle any kind of tightening.
Alas, as Powell has been pointing out as part of his reasoning why the Fed can tighten monetary policies just fine: Consumers are in historically great shape in terms of delinquencies, foreclosures, collections, and bankruptcies.
The $11 trillion in stimulus, spread around in 22 months, with much of it still trying to find a place to go, has had a huge effect. And it would take a lot of monetary tightening and financial disruption and much higher interest rates and some job losses to return these consumer credit measures to even the historical mean.It Only Took $11 Trillion in Free Money plus Forbearance & Eviction Bans to Perform this Miracle on Delinquencies, Foreclosures, Third-Party Collections, and Bankruptcies | Wolf Street
But the ‘stimulus’ inside of the predatory capitalistic greed based system was like putting a band aid on a chest wound. More young people are living with their parents than during the height of the Great Depression. There are ‘bubbles’ in all directions, all of which could easily pop if the Fed raises the rates.