Elon Musk warns of serious recession risk and points to a bunch of dead banks

  • There is a severe recession ahead if the Fed keeps raising rates, Elon Musk has said.
  • The tech billionaire pointed to the pile of dead banks as a sign of economic stress.
  • Musk has criticized the Fed more than 20 times in the past seven months for aggressive tightening.

Graveyard of dead banks proves more Fed interest rate hikes will trigger a severe downturn, Elon Musk said, saying data from his companies meant he had more real-time information on the economy than “anyone else”.

In a Tweeter On Sunday, the tech billionaire responded to the economic outlook of former U.S. Treasury Secretary Larry Summers, who predicted the The United States had a 70% chance of falling into a recession over the next year.

“A mild recession is already here,” Musk replied. “Further rate hikes will trigger a severe recession. Note my words.”

In particular, Musk pointed to the turmoil in the banking sector, the most recent failure being Bank of the First Republic. It is the latest bank to fail since the March collapse of Silicon Valley Bank, which suffered a bank run after high interest rates hit the bank’s bond portfolio.

“It’s not like the coal mine canary (SVB) is dead, one of the most dedicated miners (Credit Suisse) is dead too and the graveyard is filling up fast!” Musk said, saying the bank failures signal major stress on the economy from Fed rate hikes.

The Fed has raised interest rates by 475 basis points over the past year to keep inflation under control, a move that could easily overtightening the economy in a recessionwarn the experts.

Musk, for his part, criticized the Fed’s interest rate hikes 20 times in the last seven months. That’s because inflation is lower than Fed data shows, he said, saying its policy actions over the past year were “insane” and responsible for Tesla’s $600 billion market crash in 2022.

Musk’s range of businesses also gives him better insight into the state of the US economy, he argued.

“Between Tesla, Starlink and Twitter, I have perhaps more real-time global economic data in a head than anyone,” he added in a follow-up. Tweeter.

Some strategists, meanwhile, argued that inflation remains a major concern, which means the The Fed can’t afford to call interest rates Soon.

Markets are now pricing in an 89% chance that the central bank will hike rates another 25 basis points on Wednesday FedWatch CME Toolwhich would bring the federal funds rate to 5%-5.25%.

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