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Rising Rates to Crash the Overleveraged Economy

The effective overnight interbank lending rate is now 3.08%. It was just 0% a little over six months ago. According to the Fed’s current plans, the Fed Funds Rate (FFR) is heading to at least 4% by the end of this year; and perhaps all the way to 4.5-5% by early 2023. Is that going to cause a problem you ask? Well, rising rates have already caused stocks, bonds, gold, crypto–and just about everything else–to plunge. Even the commodity sector, which worked well in the first half of this year has fallen sharply. Indeed, virtually nothing has worked on the long side except for cash and the USD. Sadly, for most, the carnage isn’t over yet and the pace of the decline is only going to intensify. Here’s why that should be the case.

The previous cyclical high-water-mark for the FFR was 2.5%. It occurred back in December of 2018. Powell and company are now threatening to nearly double the same borrowing rate…

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