This is only a very tentative theory which occurred to me, so I haven’t determined how seriously I’m thinking it, but I’d like to lay my thinking out and read any feedback you guys have. The Fed clearly intended to elevate inflation expectations over the past half decade or so; and appears to have succeeded in doing that. If inflation expectations are elevated; market participants are proportionately motivated to generate higher yields on their wealth to keep ahead of the inflation rate which whittles down an uninvested cash position. Logically, therefore, market participants in an elevated inflation environment will be motivated to move further out into riskier and riskier capital allocations, as the inflationary cost of failing to generate sufficient yield increases. The consequence of this, presumably, is to edge the economy into a less and less sound position, due to there being increasing fragility in the market’s capital flows, compounded by leverage to an ever greater extent. Assuming I’m right about all that, it seems inconceivable to me that the Fed and similar such actors aren’t able to reason along these lines, and predict that by producing more inflation they elevate inherent risk in markets. My question, then, assuming I haven’t made any mistakes in my reasoning so far; is: what’s their endgame here? Do they want a collapse? Could this be the event they will be “forced” to respond to by the introduction of CBDCs, or comparable obviously evil surveillance state tools? What are they really doing? Just wanted to share these thoughts and explore your takes. Please let me know what you think, everyone!

The credible threat theory is now an official course. Go check it out in the classroom tab, let me know what you think. I have to admit the audio is better than the “beginners course” but still needs work.