Productivity is running at 10-year low, we never had it so bad since 1997:

The idea that Feds will come to rescue and cut rates is the principal Goldilocks illusion. Feds will not cut rates until they see productivity back on track.

There is another Goldilocks illusion that Feds will do everything to prevent recession. That’s very far from true. The Feds will rather prefer quick and mild recession now than long and severe depression later. Cheap credit of Greenspan’s era creates inefficiencies, anything that makes over 3% per year is funded. It depresses productivity and creates vicious cycle when inflation is running out of control and reinforces itself. Making money more expensive is the only way to fix it. And recession is just the side-effect of self curing economy.

At this point recession is probably good, because it will force everyone to cut fat, layoff non-productive workers and retain productive ones for less money. The non-profitable enterprises will have to go under and make more room for profitable onces. Trade balance and current account deficit will be fixed.

Just relax and prepare yourself for the recession. It’s all for our benefit, in the long run.