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Tuesday, June 28, 2022

Musk Says US Is Probably in Recession That Could Last up to 18 Months

  • Elon Musk on Monday said he believed the US was probably in a recession that could last 18 months.
  • The billionaire said the Biden administration had printed “a zillion more dollars than it has.”
  • Musk made the comments at a tech conference in Miami.

Elon Musk on Monday said he believed the US was in a


recession

that would worsen.

The Tesla founder and CEO made the comment via video at All-In, a Miami tech conference hosted by the “All-In” podcast, where he said the recession could last anywhere from a year to 18 months.

“Recessions are not necessarily a bad thing,” he said at the conference. “I’ve been through a few of them. And what tends to happen is if you have a boom that goes on too long, you get a misallocation of capital. It starts raining money on fools, basically.”

He went on to say that when this situation “gets out of control,” the economy has a misallocation of human capital “where people are doing things that are silly and not useful to their fellow human beings.”

Musk joked that an “economic enema” would eventually need to “clear out the pipes.”

“And sort of the bullshit companies go bankrupt, and the ones that are doing useful products are prosperous,” he said.

“And there’s certainly a lesson here that if one is making a useful product and has a company that makes sense: Make sure you’re not running things too close to the edge from a capital standpoint,” he continued. “They’ve got some capital reserves to last through irrational times.”

Musk appeared to blame the recession on President Joe Biden and his administration.

“This administration, it doesn’t seem to get a lot done,” Musk said. “The Trump administration, leaving Trump aside, there were a lot of people in the administration who were effective at getting things done.”

He went on to blame inflation in the US on White House policies.

“The obvious reason for inflation is the government printed a zillion amount of more money than it had,” he argued. “The government can’t just issue checks for an excessive revenue without there being inflation. Velocity of money held constant.”

“This is not, like, supercomplicated,” he added.

The billionaire has been critical of the Biden administration in the past. Earlier this year, Musk called Biden a “damp sock puppet in human form.” He has continually criticized the administration after the White House failed to invite Tesla to an electric-vehicle summit and praised General Motors and Ford over Tesla.

“It’s hard to tell what Biden’s doing, to be totally frank,” Musk said on Monday.

It’s not the first time Musk has sought to predict a recession. In 2021, the Tesla CEO said he believed the next recession would come within two years.

Musk isn’t an economist, but he’s also not the first high-profile person to raise the idea that a recession could be looming. On Sunday, former Goldman Sachs CEO Lloyd Blankfein told CBS that he believed there was a “very, very high” risk of a recession. In April, Deutsche Bank economists predicted the US would hit a recession in 2023, citing inflation and higher interest rates.

US


Federal Reserve

Chair Jerome Powell spoke out against concerns the economy could be headed for a downturn after the Federal Reserve raised interest rates early in May. He told reporters nothing suggested the economy was “close to or vulnerable to a recession.” But on Thursday, Powell appeared to backtrack.

“The question of whether we can execute a soft landing or not, may actually depend on factors that we don’t control,” he said, indicating Russia’s attack on Ukraine and supply-chain snarls could pose further issues.

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