Credit contractions suck…no matter when they happen…or how…whether the FED initiates them, or markets do, or both. When inflation comes down, in a year or so (hopefully), the FED will stop raising rates.

People have to be convinced (inflation expectations) that prices will come down. Then they have to be convinced to spend less (on goods, services and financial assets). Income and the wealth effect will help them come to that conclusion. If people feel that they have less money (whether through income or wealth), they will spend less money.

People have to be convinced that the Federal Reserve means what they say and they are effective. Unfortunately, I think the only way that people will be convinced of this, is if they lose their job and their financial assets continue to decline in value. So they spend less money, because they have less money. Because at the end of the day, inflation is mostly caused by too much money being spent on too few goods, demand outpacing supply.

Great post @taskmaster4450.