Fed Must Act Now Or System Collapses: 'Never Seen Anything Like This' | Danielle DiMartino Booth

Summary

• The U.S. labor market is in dire condition with 13 consecutive months of downward revisions to payroll data—a worse streak than during the Great Recession—and 2025 saw net job destruction, not zero growth.
• Only about 25% of unemployed workers are collecting benefits because unemployment insurance now covers only ~1/3 of living needs (vs. 2/3 fifty years ago), pushing many into the gig economy.
• The current oil price shock is a supply shock that is morphing into a demand shock as higher gas prices (an extra ~$75/month) force consumers to cut discretionary spending, evidenced by core inflation running below headline.
• Lower-than-expected tax refunds (up ~$350 YoY vs. expected +$1000) are eroding household financial buffers, meaning more money goes to gas instead of discretionary goods or savings.
• The Fed is seen as behind on its labor mandate with prohibitively high real interest rates, but hawkish FOMC members may use the oil shock as "cover" to avoid cutting rates for political reasons ahead of midterms.
• Market uncertainty is driving investors toward safety: large inflows are going into dividend-paying stocks, and energy equities are favored for their reliable dividends (e.g., Chevron) amid broader market weakness.
• The AI/tech sector faces skepticism and higher funding costs; credit default swap costs for big AI companies are rising, cash flows are falling, and the NASDAQ correction reflects a shift from "blind" lending.
• Precious metals (gold) have shown recent signs of finding a floor and being bid up, potentially linked to fewer margin calls and a slight drop in short-term yields.
• The U.S. debt crisis is a structural governor on growth; servicing costs could reach $2.1 trillion by 2036, limiting fiscal capacity for productive investments like vocational training.
• Private credit poses a potential systemic risk due to its connections to the conventional banking system and its role in funding "racier" forms of household debt like buy-now-pay-later.