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Last updated Nov 29, 2025
Episodes / E78: VC fund metrics that matter, private market update, recession, student loans, Bill Hwang arrest
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Chamath @ 00:32:40Wrong
economymarkets
If the Federal Reserve attempts to raise interest rates by roughly 400 basis points from early-2022 levels while the economy is slowing, this will significantly risk tanking (causing a sharp downturn in) the U.S. economy during the subsequent tightening cycle (2022–2023).
So I think, uh, I think it could be a very difficult path ahead for the fed. How do you raise rates 400 basis points into, uh, into a slowing economy? You could raise basis points 75, you know, 75 Bips, maybe 100 Bips, but it gives them very little freedom to operate without really tanking the economy.View on YouTube
Explanation

The conditional scenario Chamath worried about did occur, but the negative outcome he implied did not.

  1. Fed did raise rates by more than 400 bps into a slowing economy.
    From near zero (0–0.25%) in early 2022, the Federal Reserve lifted the federal funds target range to 5.25–5.5% by July 2023—a cumulative increase of 525 basis points. (federalreserve.gov)

  2. The U.S. economy did not “tank” in 2022–2023 or in the immediate aftermath.
    Real GDP grew, not contracted: BEA data (after revisions) show real GDP rising about 2.5% in 2022, 2.9% in 2023, and 2.8% in 2024—solid, above‑trend growth for a developed economy. (apps.bea.gov)

  3. No official recession followed the tightening cycle.
    The NBER recession indicator remains at 0 ("no recession") from Q1 2022 through at least Q3 2025, meaning the U.S. has not entered an NBER‑dated recession in the period when the hikes were implemented and digested. (ycharts.com)

  4. Labor market remained relatively strong, not characteristic of a “tanked” economy.
    Unemployment stayed historically low (around the mid‑3% to low‑4% range); even by late 2024, unemployment was roughly 4.1–4.2% with continued job gains in the millions over the year, far from a collapse in employment. (bls.gov)

  5. The episode is widely described as a near‑term “soft landing,” not a sharp downturn.
    Analyses from institutions such as S&P Global, the Congressional Research Service, and major banks describe the outcome of this hiking cycle as the economy steering clear of recession and moving toward or achieving a soft landing—inflation falling while growth and employment remain positive. (spglobal.com)

Because the Fed did raise rates by roughly (indeed, more than) 400 basis points, but the U.S. economy did not experience the severe downturn or "tanking" he warned would likely result, the prediction is best judged as wrong.