The Federal Reserve’s Policy Is Mistaken

Paul Craig Roberts- If the supply issues are not addressed, fear that the Federal Reserve has lost control of inflation could result in financial panic that would be self-intensifying.

Normally, recessions are the result of a reduction in liquidity by the Federal Reserve, the central bank, which is signaled by a rise in interest rates.  Normally, recessions are short-run affairs of 6 to 9 months.  Unemployment, which is as costly in its way as inflation, causes the Federal Reserve to relent and to increase liquidity, which is signaled by a reduction in interest rates.

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