He does not budge, even as some economic data indicate that the economy is likely to escape recession.
For Elon Musk, the entrepreneur behind at least five companies — Tesla, SpaceX, Twitter, Neuralink and Boring Co. — the U.S. economy is already in recession.
The question, he says, is whether this period of weaker economic activity will worsen. This is what he, and his bros — for example, the tech investor David Sacks, one of Musk’s confidants — have been repeating for several months, challenging the analysis of renowned economists like Larry Summers, the former U.S. treasury secretary.
Fed Rate Policy Designed to Fight Inflation
The cause of the recession is, according to the billionaire, the Federal Reserve‘s monetary policy to fight inflation, which is at its highest in several decades.
For several months now, the central bank has been increasing its interest rates, which has made credit more expensive. The main consequences of the policy are that it reduces consumption, one of the engines of growth, and pushes companies to postpone projects because borrowing for investment becomes costlier.
After the Fed left rates near zero for most of the coronavirus pandemic — even as the government issued stimulus packages to help households and support the economy — the central bank has changed gears in the face of an unprecedented surge in prices. The central bank raised its interest rates during its most recent meeting, putting its benchmark rate between 5% and 5.25%.
