Ark Invest CEO Warns Fed’s Actions Could Lead to 1929-Like Great Depression — Elon Musk Agrees

The CEO of concern absorption steadfast Ark Invest has warned that if the Federal Reserve does not pivot, the existent economical setup volition beryllium akin to 1929 erstwhile the Great Depression started. Tesla CEO and Twitter main Elon Musk agreed.

The Fed, Inflation, and the Great Depression

Ark Invest CEO Cathie Wood, who is besides the concern absorption firm’s laminitis and CIO, shared her thoughts astir ostentation and however the Federal Reserve could propulsion the planetary system into a 1929-like slump successful a bid of tweets Saturday.

She explained that the Federal Reserve raised involvement rates “to squelch fiscal speculation” successful 1929, followed by Congress passing the Smoot-Hawley Tariff Act successful 1930, which enactment much than 50% tariffs connected implicit 20,000 goods and pushed the planetary system into the Great Depression. “If the Fed does not pivot, the setup volition beryllium much similar 1929,” she warned. Tesla, Spacex, and Twitter brag Elon Musk concurred.

Wood pointed retired that “If ostentation is unwinding, arsenic we believe, past we could beryllium heading backmost to the future, the Roaring Twenties,” emphasizing:

The setup is remarkably similar!

The Ark Invest enforcement noted that the satellite was astatine warfare anterior to the Roaring Twenties, citing WWI and the Spanish Flu pandemic. Inflation soared during that time, peaking astatine 24% successful June 1920, she continued, adding that the Federal Reserve responded by raising involvement rates little than two-fold from 4.6% to 7% successful 1919-1920.

Inflation past dropped “precipitously successful 1 twelvemonth to antagonistic 15% successful June 1921,” Wood said, noting that “the Fed lowered involvement rates from 7% successful May 1921 to 4% successful July 1922, tripping the power for the Roaring Twenties.” The enforcement additionally shared:

We would not beryllium amazed to spot broad-based ostentation crook antagonistic successful 2023.

“Faced with overmuch little ostentation this clip around, the Fed has accrued involvement rates 16-fold, a superior mistake successful our view,” she further opined.

“The University of Michigan’s Consumer Sentiment Survey is astatine a grounds low, beneath levels deed successful 2008-09 and 1979-82, a setup for a liquidity trap similar that successful the Great Depression erstwhile monolithic monetary stimulus failed,” the Ark Invest main cautioned.

Noting that the Great Depression and the Roaring Twenties are 2 imaginable outcomes, Wood described: “Given conflicting information and the stark quality successful these outcomes, the Fed should beryllium debating the imaginable risks associated with its existent policy, astatine the precise least, alternatively of voting unanimously.”

Emphasizing the similarity betwixt today’s economical concern and the 1 successful 1929, she stressed:

Unfortunately, contiguous has immoderate echoes of the same. The Fed is ignoring deflationary signals, and the Chips Act could harm commercialized possibly much than we understand.

Do you hold with Ark Invest CEO Cathie Wood and Tesla CEO Elon Musk astir the Fed and the hazard of a 1929-like depression? Let america cognize successful the comments conception below.

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