> In the early 80s, the G7 economies tightened the money supply, raising interest rates dramatically, in an effort to bring inflation under control. You can see the effect in this image:
It's fascinating how much attention the Federal Reserve gets when it comes to the business cycle. It's not clear what's being referenced above, but the reference to the Fed funds rate chart below suggests it's "the Fed" and company.
It's possible, though, that the Fed is irrelevant.
Have a look at a different interest rate chart: the 30-year Treasury yield (10-year chart looks similar). This is the risk-free price of money that comes due in 30 years [zoom out by clicking "max"]. Given the three-decade duration, this is about as close as one can get to answering the question: what is the economy likely to look like if the Fed didn't matter? This market is giving a peek into the relative level of growth and inflation expectation in the distant future.
https://fred.stlouisfed.org/series/DGS30
The chart peaks around 1981 and from there it's a fully-loaded train barreling down the hill without a brake and only hitting the occasional bump along the way. Through recession (grey bands) and recoveries (after the grey bands), through manias (1999-2000, 2006-2007, 2020-?) this long-term rate sets lower highs and lower lows, year after year.
During all this time, the Fed is doing its thing, pumping up the idea that it controls "the money supply" and it alone can fight inflation or get the economy out of recession.
That is, until this year. Depending on how you look at it, the top of the long-term trend line may have been broken this year, or just barely touched. In other words, this chart sits at a possible inflection point marking either the beginning of a new regeime (much higher interest rates) or reversion to the status quo (much lower and likely negative interest rates).
The point of all of this is that if the Fed were indeed the center of the financial universe, is this the kind of chart you'd expect to see? What factor(s) in the real economy are capable of producing a chart like that, independent of the Fed? Finally, what happens when/if this chart crosses the x-axis, or breaks decisively above trend?