2 years ago
Tesla CEO Elon Musk has warned that a large complaint hike by the Federal Reserve risks deflation successful the U.S. economy. Musk’s informing followed an investigation by Ark Invest CEO Cathie Wood, who cautioned that “Leading ostentation indicators similar golden and copper are flagging the hazard of deflation.”
Elon Musk, Fed Rate Hikes, and Deflation
Tesla and Spacex CEO Elon Musk tweeted Friday evening that “A large Fed complaint hike risks deflation.” His tweet has attracted overmuch attention. At the clip of writing, it has been liked 80K times and retweeted astir 7K times.
Comments flooded successful with immoderate agreeing with the Tesla CEO portion others insisted helium was incorrect astir the U.S. economy. Real Vision CEO and crypto capitalist Raoul Pal agreed with Musk, tweeting: “Yup. Pretty overmuch baked successful the cake.”
Northmantrader laminitis and pb marketplace strategist Sven Henrich stressed that the information is the Federal Reserve being “obtuse to consequences.” He elaborated that the cardinal slope was “Too dilatory to respond successful the archetypal place” and is “now slamming the ft connected the brakes,” emphasizing that the Fed is “too reliant connected backward-looking information risking breaking things quickly.”
Gold bug and bitcoin skeptic Peter Schiff offered a antithetic view, replying to Musk:
It risks hyperinflation. Higher indebtedness work costs, a terrible recession, exploding Federal fund deficits, and collapsing plus prices volition nutrient a worse fiscal situation than 2008. The Fed volition respond with monolithic QE, tanking the dollar and sending user prices soaring.
Politicians besides chimed successful connected the conversation. Congresswoman Nancy Mace (R-SC) opined: “If [U.S. President Joe] Biden and [House Speaker Nancy] Pelosi hadn’t spent trillions of dollars we don’t have, we wouldn’t beryllium having this conversation…”
Federal Reserve Chairman Jerome Powell precocious emphasized the cardinal bank’s hawkish stance successful his code astatine Jackson Hole, Wyoming. He noted that the Fed’s combat against ostentation volition “bring immoderate pain.” Many radical are acrophobic astir the Federal Reserve raising involvement rates, including Senator Elizabeth Warren (D-MA), who stated that she is “very worried” that the cardinal bank’s enactment volition extremity the U.S. system into recession.
Musk’s tweet followed an analysis by Ark Invest CEO Cathie Wood who warned astir deflation connected Wednesday. “The Fed is basing monetary argumentation decisions connected lagging indicators: employment and halfway inflation,” she detailed, elaborating:
Leading ostentation indicators similar golden and copper are flagging the hazard of deflation. Even the lipid terms has dropped much than 35% from its peak, erasing astir of the summation this year.
“One of the champion ostentation gauges, the golden terms peaked much than 2 years agone successful August 2020 astatine $2,075 and has dropped astir 15%. Lumber prices person dropped much than 60%, copper -30%, robust ore -60%, DRAM -46%, and crude lipid -35%,” Wood explained.
“Further downstream, retailers look to beryllium swimming successful inventories which they could beryllium forced to discount aggressively to wide the shelves for vacation merchandise. The astonishment could beryllium deflation successful the CPI and PCE deflator by year-end,” the enforcement added. “In the pipeline, ostentation is turning into deflation.”
Musk said successful August that ostentation has peaked and “is going to driblet rapidly.” He besides predicted that we volition apt person a recession lasting astir 18 months.
Do you hold with Elon Musk that a large Fed complaint hike whitethorn pb to deflation? Let america cognize successful the comments conception below.
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