Elon Musk implores the Fed to cut interest rates or risk the economy falling into a “severe” recession.

Elon Musk believes the Federal Reserve must immediately cut interest rates or risk a severe recession. The outspoken Tesla CEO made his opinion known in a tweet Wednesday, which reads as follows:

“The trend is concerning. The Fed needs to cut interest rates immediately. They are massively amplifying the probability of a severe recession.”

According to Elon Musk, the Fed’s attempt to curb runaway inflation could make the economy worse. As it stands, prices have skyrocketed, and many households across the United States are feeling the effects. Energy prices are hovering at record levels, and the tech space and crypto industry are wallowing in significant devaluation.

Elon Musk has already warned of an impending recession. On October 24, the brash billionaire estimated that a global recession could last until the spring of 2024. Although Elon Musk admitted that he was only “guessing“, his prediction came amidst other gloomy economic forecasts from several business leaders. These included Jeff Bezos, CEO of Amazon, Jamie Dimon, CEO of JP Morgan, and David Solomon, CEO of Goldman Sachs.

Elon Musk’s latest recession warning sparks debate on Twitter

Elon Musk’s latest remarks on the likelihood of a recession came in an exchange with Tesmanian co-founder Vincent Yu. Like Musk, the Tesmanian co-founder had previously expressed his concern about the health of the economy and predicted a recession next year. The Twitter exchange between Musk and Yu drew input from several other users who also reacted. While some seemed to side with the Fed’s stance on interest rates, others disapproved of the idea of raising rates to curb inflation. In addition, a small number of Twitter users expressed ambivalence about the Fed’s position. For example, a user with the handle @CricketSurfing stated::

“I don’t know where the sweet spot is in terms of interest rates, but the goal should be to allow the M2 money supply to grow roughly at the rate of GDP. Right now, the Fed is *shrinking* M2. It has hit the brakes, when it should have taken its foot off the gas pedal.”

Sven Henrich also weighs in

The founder of Northman TraderSven Henrich, also contributes to the interest rate thread. According to Sven Henrich the Fed’s actions on perceived inflationary pressure were overdue. As a result, the U.S. central bank attempted to make up for its decisive delay in aggressively tightening record debt. However, Sven Henrich lamented that the Fed is implementing its strategy without “taking into account the lagged effects of these rate hikes“. The Northman Trader concluded by predicting that the Fed would realize the extent of the damage of its decision too late.

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Like Yu, Henrich’s assessment of the Fed’s decision drew a downward trend. affirmative response by Elon Musk.

Sven Henrich also attacked the Fed by stating that the central bank continues to forecast positive GDP growth for 2023. He explained that such misplaced optimism comes in the midst of obvious signs, but that he does not seem to be surprised. According to Sven Henrich, the Fed exhibited the same misplaced optimism about GDP in 2008, which led to the economic collapse of 2009. Sven Henrich concludes his critique of the Fed by saying:

“As always, they will cut rates in a panic once the impact of the recession is there & then blame unforeseen factors.”

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