Why The Cure For Inflation Is Recession

The latest reality check to gobsmack the Fed is the housing market, which is heading for a significant downturn.

As MBA reports, the Refinance Index plunged 16% from the previous week and was 56% lower than the same week one year ago.

But most notably, the seasonally adjusted Purchase Index tumbled 10% from one week earlier - after holding up for a few weeks amid rising rates. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 6 percent lower than the same week one year ago.

The reason mortgage applications and housing purchases are down is because interest rates are rising, at least in part because the Fed is committed to a rare increase next month, and a few more beyond.

It is worth noting the 2008 financial crisis was catalyzed in part by Ben Bernanke's interest rate hikes deliberately designed to “choke off” the subprime mortgage market. He succeeded only too well.

Yet this is the expected result of an interest rate rise. Raise rates to stop inflation and more than just financial markets collapse.