- June 19, 2022
- Posted by: Stratford Team
- Category: Economy
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When the Federal Reserve raised interest rates this week by the largest amount since 1994, it did more than declare war on inflation.
The U.S. central bank also launched a high-stakes test of the economy’s ability to shed its dependence on limitless credit and tolerate higher borrowing costs for consumers, businesses and the government.
For 40 years, the formula for U.S. economic growth has been the same: cheap money. Consumers could borrow easily to buy homes and cars. Companies, whether profitable or not, could tap bond investors for cash to fund their operations. And Washington could afford to bail out both Wall Street and Main Street by running eye-popping budget deficits made possible by borrowed funds.
Whenever the stock market wobbled — beginning with the 1987 crash — the Fed rode to the rescue by slashing rates and flooding markets with cash.
Those days are over, at least for now.
“It’s just a…
