1. Covid stimulus vastly increased the amount of cash at the bank.
2. Artificially low interest rates plus the cash infusion caused inflation.
3. While inflation was beginning, the Fed somehow got it in its head that inflation was “transitory” and rate hikes weren’t needed.
4. The Fed waited too long to raise rates, so they needed to spike rates as quickly as possible once they changed their opinion on inflation.
Basically the government gave banks hundreds of billions of dollars to lend via stimulus spending, and then made those loans worthless by spiking interest rates less than a year later. Whose fault is that really?
