Realistically, what are the viable directions from here, and what are their outcomes?
Asset price destruction is also a likely outcome, and will bring down home and equities prices, allowing for those on the margins to get into homes where prices were too high before, as well as get exposure to the stock market for wealth accumulation. This, in my humble opinion, is a desired outcome. TLDR Deflate the asset bubbles.
A light recession would be welcome for price stability, and with labor participation rate where it is at, I think the data shows some reliable indicators that unemployment won't spike when the Fed starts banging away with their rate hammer on the broader economic system. A million people, for a variety of reasons, left the labor force during the pandemic, while 10k Boomers retire per day. The US economy faces an ongoing labor shortage well into the next decade [1].
https://news.ycombinator.com/item?id=32069033 (Netherlands poised to make work-from-home a legal right, says report)
https://www.euronews.com/next/2021/11/11/which-countries-pla... (After Portugal, which countries in Europe are improving post-COVID remote working laws?)
Progress takes time, and requiring people burn (currently, very expensive and in short supply) fossil fuels to move their bodies to an office to do knowledge work is silly. Perhaps this will be more clear as the global oil market situation deteriorates further. More economic pain may need to occur before such policy is encouraged along. C'est la vie.
Yet it's still mandatory for many tech jobs in Europe. Companies are delusional with their butts in seats culture.
(It's also hard to define worse timing/actions by Powell if he were a malignant actor)
1. After states started reopening
2. On Federal Stimulus (PPP, unemployment, or 2nd/3rd stimulus checks)
3. Staged on percentage of population vaccinated and covid positivity rates / propensity to travel (ie spun down by June)
Something Congress should consider instead of tariffs on imported goods (steal, aluminum, wood) that have failed miserably (actually increased trade deficit) is applying these taxes on virgin material. Promoting recycling rusting steel, scrap aluminum, plastic and fiberglass composite wood and concrete could bring back domestic production and clear our backyards, while being greener than China making raw material and shipping it.
I was under the impression that China had soaked up most of the recyclable steel and part of the reason why things like coke plants near Pittsburgh were reopening was because we were now back to primary steelmaking.
Like you, I got every appendage crossed for some type of soft'ish landing, but with everything going globally pitching a little gas here and there on our inflation fire I am almost 100% positive the Fed will have to keep throwing husky rate hikes and just man up and punch inflation in the nose. And I hate it, but there are going to be a lot of people lose their jobs or get hurt somehow else at that expense.