Elon Musk said the piles of dead banks proved that rate hikes would cause a severe depression: ‘I could have more real-time data about global economy in one head than any other person’

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• Elon Musk warned that a recession is imminent if the Fed keeps raising rates.
• The pile of dead bank branches was cited by the tech billionaire as an indication of economic distress.
• Musk has criticised the Fed for its aggressive tightening over 20 times during the last seven months.

Elon Musk claimed that the graveyard of dead bank proves that further Fed interest rate increases will cause a severe economic downturn. He said that data from his company gave him more insight into the economy in real time than "anyone else ever."

In a Sunday tweet, the tech billionaire responded an economic outlook by former US Treasury Secretary Larry Summers who predicted the US would tip into recession in the next year.

Musk responded, "A mild recession has already begun." "Further interest rate increases will trigger severe economic recession." "Mark my words."

Musk cited the turmoil in the banking industry, citing First Republic Bank as the latest failure. This is the latest bank failure since the collapse of Silicon Valley Bank in March, when high interest rates caused a run on the bank's bonds portfolio.

"It is not just that the canary (SVB) has died. One of the most ardent miners (Credit Suisse), too, died & the graveyard is rapidly filling up!" Musk explained that the failures of the banks are a sign of the economic stress caused by Fed rate increases.

Experts warn that the Fed's 475 basis point increase in interest rates over the last year could push the economy into recession.

Musk has criticised the Fed's interest rates hikes more than 20 times over the last seven months. He said that the Fed's inflation data is inaccurate because the actual rate of inflation is much lower. This, he claimed, was the reason for Tesla's market decline in 2022, which he attributed to the Fed's "foolish policy decisions" over the last year.

Musk argues that his diverse portfolio of companies gives him a better understanding of the US economic situation.

In a subsequent tweet, he said: "Between Tesla Starlink & Twitter I may have more global economic data real-time in one head than anyone else ever."

Several strategists have said that the Fed cannot afford to lower interest rates any time soon, as inflation is still a major concern.

According to CME FedWatch, the markets now price in 89% of the chance that the central bank will raise rates another 25 basis point on Wednesday. This would bring the fed funds rate up to 5% to 5.25%.

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By: jsor@insider.com (Jennifer Sor)
Title: Elon Musk says the pile of dead banks proves more rate hikes will cause a severe recession: ‘I may have more real-time global economic data in one head than anyone ever’
Sourced From: markets.businessinsider.com/news/stocks/elon-musk-recession-warning-tweet-first-republic-bank-failures-fed-2023-5
Published Date: Mon, 01 May 2023 16:15:02 +0000

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