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Tuesday, March 28, 2023

Elon Musk Says it’s Obviously Correct That Fed is Tanking the US Economy

Elon Musk Says it’s Obviously Correct That Fed is Tanking the US Economy – Elon Musk, the billionaire, backed a prominent Wharton economist who accused the Federal Reserve and its chairman, Jerome Powell, of completely mishandling the current economic downturn. Musk reacted to Wharton professor Jeremy Siegel’s fiery rant on CNBC’s “Halftime Report” on Friday, saying the Fed’s current policy path is “way too tight” and “makes absolutely no sense to me whatsoever.”

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Siegel, who admitted he was “very upset” with the Fed’s handling of the situation, accused Powell and his colleagues of delaying interest rate hikes far too long. Now, Siegel contended, the Fed is sabotaging the economy by being overly aggressive with rate hikes, despite signs that inflation is already easing.

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“It’s like a pendulum. They were way too easy, as I’ve told you and many others, through 2020, 2021,” Siegel said. “And now, ‘Oh my God, we’re going to be real tough guys until we crush the economy.’ ‘Poor monetary policy’ would be an understatement.” “Siegel is obviously correct,” Musk tweeted on Saturday in response to a clip of Siegel’s rant.

Siegel accused Powell of neglecting several economic indicators, including falling commodity prices, a slowing housing market in the United States, and a decline in the money supply. Musk is one of many business leaders who have expressed concern about the state of the US economy in recent months. Musk hinted at layoffs at Tesla in June, saying he had a “super bad feeling” about the economy.

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Earlier this month, Musk and others warned that the Fed risked causing “deflation,” or a damaging drop in prices, by raising rates too quickly despite a slowing economy. Since last week, when the Fed raised interest rates for the third month in a row, the stock market has fallen deeper into bear territory. Officials from the Federal Reserve indicated that more significant increases are likely in the coming months, indicating that the Fed is staying on a hawkish path to combat decades of high inflation.

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That’s despite warnings from Siegel, Musk, and others that the Fed could send the economy into a long-term slump. The US GDP has already fallen for two consecutive quarters, which is widely accepted as the definition of a recession.

Powell reiterated last week that the Fed intended to raise its benchmark to a “restrictive level” and “keep it there for some time” until there were meaningful signs that inflation had declined. Powell admitted that the stance would almost certainly result in job losses and a significant correction in the US housing market.

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