In the next economic crisis, I think we will learn a hard lesson about the impotence of Fed rate cuts. Let me explain. Long time followers will recall my refrain since 2023: due to the speed and distance of Fed rate hikes, the starting point of the zero bound, and the woeful lack of credit rolled since then, a HISTORIC CHASM exists between the rates on outstanding debt (esp. mortgages) and the current cost of capital. This is unlike any past economic era and it could play a surprise role in the next downturn. In a typical expansion, the Fed raises rates methodically as the economy grows, ratcheting up borrowing costs, and new tranches of loans are born at each higher step. Then when they cut rates in a recession, RELIEF is unlocked with each rate cut as a new group of households get a chance to refinance, tap some equity, and lower their interest rate. This is the so-called refinance channel and it's one of the most potent positive forces in recoveries, giving homeowners much needed liquidity and a boost to consumption. This process of rolling debt at ever higher rates HAS NOT HAPPENED to any notable degree since Powell first hiked in March 2022. Recall the years 2020-2021, which were historic for mortgage creation. Everyone locked in rates in the 2s and 3s. We had the lowest mortgage rates America had ever seen. But since Powell began tightening, credit growth overall has reduced to the slowest pace of ANY EXPANSION in US history. The mortgage market is a ghost town, even with the recent pop in refis. And in case you haven't noticed, long end rates have been rising recently. A new 30 Year fixed is 6.7%. And here's the kicker: 70% of outstanding US fixed rate mortgages are locked into a rate <= 5%. Over half are below 4%. What this means is that, even if the Fed cuts HUNDREDS of basis points, it still won't represent material relief for millions of households. They will not be able to unlock those trillions of untapped homeowner equity without paying a higher rate. The refinance channel is effectively clogged by the fact that Powell's hiking crusade began from the zero lower bound on rates AND followed the biggest direct stimulus to households in history, which allowed them to unknowingly build up enormous insulation from future rate cuts. The Fed loaded its gun over 18 months hiking from 0.25% to 5.5%. But when they try to fan the hammer and unload easing on a flailing economy, all those rounds could end up acting like blanks. cc @TheFlowHorse since I soft RTed you.