Elon Musk issues a stern warning about the economy

Billionaire Elon Musk has expressed concern about the economy. The world’s richest man has been sounding the alarm for several months now, warning that the economy is facing a deep recession if it continues. The central bank’s monetary policy is on track.

It comes as the Federal Reserve holds its last monetary meeting of the year in the coming days, the businessman has come up with a new prediction. Like his previous predictions, this is deeply troubling.

The Federal Reserve has raised interest rates sharply in recent months, raising the benchmark rate from near zero during the pandemic to a range of 3.75% to 4%, in an effort to combat inflation that has reached its highest levels in 40 years.

However, many economists say that this “aggressive” monetary policy will plunge the economy into recession, according to “The Street” website, which was viewed by Al Arabiya.net.

The recession will be greatly magnified

The Central Bank holds a two-day meeting on December 13 and 14. Policy makers are expected to raise interest rates by 50 basis points, after 4 consecutive hikes by 75 basis points.

In addition, the Fed will publish its first quarterly forecasts since September. This will provide clues as to where the central bank sees the US economy heading over the next few years.

Musk believes that if the Fed announces a rate hike as expected, it will be a huge mistake. He has warned that the decision will plunge the economy into a deeper recession than is already expected.

“If the Fed raises interest rates again next week, the recession will swell dramatically,” the billionaire said yesterday in a message on Twitter.

The CEO of electric car maker Tesla, too, agrees with investment pioneer Cathy Wood, who continues to assert that a sustained rise in prices will lead to deflation, a risk Musk already flagged last September.

“The bond market seems to be signaling that the Fed is making a huge mistake,” Wood wrote in a tweet. “At -80 basis points (as measured by 10-year versus 2-year Treasury yields), the yield curve is more inverted now than at any time since the early 1980s when double-digit inflation took hold.”

“Usually an inverted yield curve indicates stagnation and/or lower than expected inflation. In our view, deflation presents a much greater risk than inflation. Commodity prices and massive retail discounts support this view,” she added.

Musk responded by tweeting, “Absolutely.”

Deflation versus inflation

But economist Peter Schiff disagrees with Musk and Wood.

Schiff commented on Musk’s post, “In fact, the yield curve reflects investors’ expectations that the Fed will succeed in bringing the inflation rate down to 2%.” “Investors are wrong. The only thing the Fed will do is make the recession worse, which will crush the dollar and push up consumer prices.”

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