Monetary Policy is Non-Linear

The Fed spent a decade using near-zero rates to create inflation. It didn't work. Now they're using rate hikes to fight inflation with the same certainty, ignoring that the same mechanism that failed to stimulate also can't brake until hitting a critical threshold. Everything below that point behaves differently than economic models predict.

• Central banks never reconciled a decade-long failure to generate inflation through rate cuts. Now they're deploying those same failed tools to fight inflation with complete confidence. The contradiction sits unexamined.
• At current rate levels, cash-rich corporations still hire and buy back stock. Wealthy households still purchase expensive cars and take expensive vacations. The behavior that moves inflation hasn't shifted yet because we haven't crossed the threshold.
• The inflation that needs controlling only comes from those with capital. Yet the Fed must raise rates to levels that change cash-rich behavior. Crossing that threshold means non-wealthy households face collapse. It's a paradox embedded in the mechanism itself.
• When rates finally reach the level that changes decisions among the wealthy, it's already too late for those without capital. The economic pain concentrates on those who never had access to free money. For them it won't be a recession.
• A rate level high enough to actually control inflation will feel like depression, not recession, to non-wealthy households and small businesses. And this correction is scheduled to arrive just before the 2024 election.