The circumstances of the Silicon Valley Bank (SVB) collapse are unique enough that it probably won’t trigger a widespread financial contagion. Nevertheless, it is a timely reminder that when the Fed is singularly focused on squeezing inflation by jacking up interest rates – it often ends up breaking things. Regardless of whether the problems show up first in the real economy, asset markets or the financial system, they can trigger an adverse feedback loop that develops into a hard landing, which takes down all of them.
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