Could a Housing Recession Take Down the U.S. Economy?
Plain English with Derek Thompson
The Impact of Higher Interest Rates on the Economy
The 'crimped garden hose theory of everything' explains the chaos of 2021 and 2022. People were experiencing difficulties with reservations, flights, and furniture backlogs. However, the theory also predicts an abundance of liquidity. Many consumers had restrained their spending during previous years and were now eager to release it into the economy. This helped counter the impact of higher interest rates. Additionally, the rapid increase in interest rates only affected those who had recently borrowed money, while others with low mortgage rates or locked-in debt were not immediately affected.
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