No one is that dumb.
As I have been warning for months, the end of this round of QE (6 trillion cumulatively in MBS and treasury debt) meant the inflated bubbles would become vulnerable.
These inflated bubbles had knock on effects (leverage) for riskier debt (e.g., see crypto).
Now the Fed is selling and raising interest rates to dry up liquidity in an effort to curb inflation (which was primarily caused by cost-push inflation (supply chain disruptions that increase the cost of goods)).
With unemployment relatively low, the Fed’s dual mandate is satisfied by merely combatting inflation via interest rate hikes and balance sheet reductions. These tools create deflationary pressure on overpriced assets.
Given the continued supply chain disruptions, there is no justification to keep pouring starter fluid into an overheated economy not firing on all cylinders.
It’s a blunt set of tools with a good risk of recession and pain. But the Fed’s mandate to curb inflation is clear and unequivocal. The Fed protects International Capital to maintain the value of the USD as the world’s primary reserve currency. The Fed’s independence allows it to make these painful decisions for those purposes.
tldr: the Fed giveth; the Fed taketh away.