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- Elon Musk warned the US economy faces a deep recession that could last a year or two.
- His companies faced immense challenges during the dot-com crash and financial crisis, he said.
- Musk has endorsed Cathie Wood and Jeremy Siegel’s criticisms of the Fed’s interest-rate hikes.
The US economy is barreling towards a severe recession, and the Federal Reserve needs to stop hiking interest rates or it will exacerbate the coming downturn, Elon Musk has said.
“We are headed into, I think, quite a serious recession,” he told Twitter employees in a meeting on Thursday, according to The Verge. Musk added that he expects the economic slump to last a year or two.
The Tesla, SpaceX, and Twitter CEO pointed to the recent surge in companies laying off workers as evidence of trouble ahead. He also noted the “excruciatingly difficult” task of keeping his businesses afloat during the dot-com crash and financial crisis had traumatized him, making him paranoid about recessions.
Musk has been issuing similar warnings for a while, including in his first email to Twitter employees as the company’s new owner.
“Frankly, the economic picture ahead is dire, especially for a company like ours that is so dependent on advertising in a challenging economic climate,” he wrote.
Recession fears have mounted this year, as the Fed is actively trying to cool the economy to curb soaring prices.
Inflation surged to a 40-year high of 9.1% in June, and was still 7.7% in October — well above the Fed’s target rate of 2% a year. In response to the threat, the US central bank has hiked rates from near zero in March to a range of 3.75% to 4%, and signaled they could peak above 5% for the first time since 2007.
Musk has endorsed several commentators who share his concerns. For example, tech evangelist and Ark Invest CEO Cathie Wood tweeted on Saturday that her team believes inflation is cooling, and further rate hikes could lay the stage for a second Great Depression.
“Exactly,” Musk replied. He also tweeted “Siegel is obviously correct” in September, after Wharton professor Jeremy Siegel railed against the Fed for going overboard in fighting inflation.
Musk personally criticized the Fed during Tesla’s third-quarter earnings call in October. Fed Chair Jerome Powell and his colleagues have raised rates too aggressively, and pay too much attention to backwards-looking data and not enough to forward-looking indicators, he said.
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