Tesla CEO Elon Musk Warns Major Fed Rate Hike Risks Deflation – Economy Bitcoin News

Tesla CEO Elon Musk warned that a steep rate hike by the Federal Reserve risks deflation in the US economy. Musk’s warning followed an analysis by Ark Invest CEO Cathie Wood, who warned that “major inflation indicators such as gold and copper are signaling the risk of deflation.”

Elon Musk, Fed rate hikes and deflation

On Friday night, Tesla and Spacex CEO Elon Musk tweeted that “Major Fed rate hike risks deflation.” His tweet attracted a lot of attention. At the time of writing, it has been enjoyed 80,000 times and retweeted nearly 7,000 times.

Tesla CEO Elon Musk warns that a major Fed rate hike risks deflation

The comments came with some agreeing with Tesla’s CEO, while others insisted he was wrong about the US economy. Real Vision CEO and cryptocurrency investor Raoul Pal agrees with Musk, tweeting, “Yes. Basically baked in pie.

Northmantrader founder and principal market strategist Sven Henrich pointed out that the danger is that the Federal Reserve is “obtuse to the consequences”. He explained that the central bank was “too slow to react in the first place” and “is now hitting the brakes”, noting that the Fed is “too dependent on backsights which risk breaking things quickly.”

Peter Schiff, a gold bug and bitcoin skeptic, offered a different view, replying to Musk:

Risk hyperinflation. Higher debt service costs, a severe recession, a bursting federal budget deficit and plummeting asset prices will produce a worse financial crisis than in 2008. The Fed will respond with massive QE, cashing in on the dollar and making soaring consumer prices.

Politicians also intervened in the conversation. Congresswoman Nancy Mace (RSC) said: “If [U.S. President Joe] Biden and [House Speaker Nancy] Pelosi hadn’t spent trillions of dollars that we don’t have, we wouldn’t have this conversation … “

READ ALSO :   White House Observes Power Reliability Standards, Energy Efficiency Rules for Bitcoin and Other Cryptocurrency Miners

Federal Reserve Chairman Jerome Powell recently highlighted the central bank’s hawkish stance in his speech in Jackson Hole, Wyoming. He noted that the Fed’s fight against inflation “will bring pain.” Many people are concerned about the Federal Reserve’s rising interest rates, including Senator Elizabeth Warren (D-MA), who said she was “very concerned” that central bank action could precipitate the US economy in recession.

Musk’s tweet followed a analyses by Cathie Wood, CEO of Ark Invest, who warned of deflation on Wednesday. “The Fed is basing monetary policy decisions on lagging indicators: employment and core inflation,” she detailed, elaborating:

Leading inflation indicators such as gold and copper are signaling the risk of deflation. The price of oil also fell more than 35% from its peak, wiping out most of this year’s gain.

“One of the best indicators of inflation, the price of gold peaked more than two years ago in August 2020 at $ 2,075 and fell about 15%. Timber prices have fallen by more than 60%,” -30% copper, -60% iron ore, -46% DRAM and -35% crude oil, “explained Wood.

“Further downstream, retailers appear to be swimming in inventory that may be forced to aggressively discount to clear the shelves for holiday merchandise. The surprise could be the deflation of the CPI and PCE deflator by the end of the year, “added the executive.” In the pipeline, inflation is turning into deflation. “

Musk said in August that inflation has peaked and “will fall quickly”. He also predicted that we are likely to have a recession lasting about 18 months.

READ ALSO :   Popular Bitcoin Trust Reaches New Historical Lows and Discounts - GRAYSCALE BITCOIN TRUST by Grayscale Bitcoin Trust (BTC) (OTC: GBTC)

Tag in this story

Ark Invest, Cathie Wood, Cathie Wood Deflation, Copper, Elon Musk, Elon Musk Deflation, Elon Musk Fed Rate Hike, Elon Musk Inflation, Elon Musk Recession, Federal Rate Hikes, Gold, Major Hike of federal rates

Do you agree with Elon Musk that a major Fed rate hike could lead to deflation? Let us know in the comments section below.

Kevin Helms

Austrian economics student Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin’s security, open source systems, network effects, and the intersection of economics and cryptography.

Image credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, nor a recommendation or endorsement of products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or allegedly caused by or in connection with the use or reliance on any content, goods or services mentioned in this article.

Tinggalkan komentar