Another powerful businessman declared that we are facing a recession. This time, it is the most powerful of them all: Tesla and Space X CEO Elon Musk.
Rampant inflation, energy crisis and war in Europe. The situation looks dire for the global population, and many ask themselves when will a recession officially be announced. It would be the third world financial crisis since 2008, maybe a sign that something is not working quite right.
In any case, recession in the United States is announced by a governing body; usually after 2 consecutive quarters of GDP decrease. GDP has fallen for the second quarter in a row now, but no recession has been announced yet.
On the other hand, it is powerful businessmen that declared the start of a recession. The last to join this row was Tesla CEO and richest man in the World Elon Musk. He predicted that the recession will last well into 2024 with an ominous post on Twitter.
Just guessing, but probably until spring of ‘24
— Elon Musk (@elonmusk) October 21, 2022
Earlier this week, David Solomon and Jamie Dimon separately predicted the start of a recession “within the next six to nine months”. They are respectively the CEOs of Goldman Sachs and JPMorgan Chase, two of the most powerful banks in America.
Why Elon Musk can benefit from this
Everyone has someone to blame for the recession. Elon Musk’s pic is the US Federal Reserve. Their job is to try to slow inflation by increasing the currency’s interest rate.
What this means is that the Federal Reserve tries to lower the amount of money (in this case the Dollar) in circulation, therefore decreasing inflation. This, however, has the counter-effect of slowing down growth and making a recession ever so likely to happen.
So far, the Federal Reserve has increased interest rate to 3/3.25%, and it is likely a trend that will continue well into next year. Some estimates say that the Fed will raise interest rates up to 5%.
Elon Musk has always been vocally against the policy of increasing interest rates. In his words, it does not matter if inflation has risen in the past year, what matters is how the economy will change next. In his opinion, interest rates have been increased too much and the risk of an economic recession is too high.
These words, however, might have been dictated by the fact that Elon Musk is set to benefit from a decrease in interest rates. If the Fed decides to stop the hike, the Dollar would also lose value.
It is a simple mathematical concept: if the interest rates are high, the less money circulates and so the higher its value. So far, the Dollar is at a 20-years highest, and it is set to continue this trend.
Elon Musk, however, does not want a strong Dollar as this increases businesses’ borrowing costs. In other words, Elon Musk might be right about a recession, but his words should be taken with a grain of salt.
