‘Recession Is Inevitable,’ Says Elon Musk

SpaceX founder Elon Musk joins group of business figures anticipating recession

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“A recession is inevitable at some point,” predicts Tesla tycoon and CEO Elon Musk in an interview with Bloomberg News Editor-in-Chief John Micklethwait at the Qatar Economic Forum held in the city of Doha.

In a videoconference, Musk said, “as to whether there is a recession in the near term, I think that it’s more likely than not.”

With these statements, Musk joins a number of economic and business figures predicting a possible recession in the United States, along with economists of the stature of Nouriel Roubini and Larry Summers.

The U.S. economy may have already fallen into recession, as in the last quarter it had a negative growth of 1.4 %, which means a setback in economic activity. The investment bank Goldman Sachs has also cut its growth projections in view of the increased risk of a recession.

With inflation already above 8.6 % annually —contrary to the forecasts of the Federal Reserve (FED) and the Biden administration— the central bank has decided to raise interest rates to contain the rise in prices.

By raising the interest rates at which it lends to banks, these, in turn, have to raise the interest rates they charge their users on credit cards, as well as raise the rates on loans such as new mortgages, car loans, and student loans. Likewise, the cost for companies to get into debt rises, which may end up discouraging some riskier investments.

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In short, the cost of spending money in the present becomes more expensive, so Americans will have to save and companies will have to postpone investments. This causes the economy to slow its growth in exchange for price stability.

Unfortunately, the crisis is also supply-side. Supply chains are in a period of reorganization because of the disinvestment suffered from the quarantines, while demand from the emergence of e-commerce during and after the pandemic was growing at a pace not seen before.

In the past, Musk has been critical of the Biden administration for its tax agenda, which he has called a complete lie. The Tesla CEO’s comments contrast with President Joe Biden’s refusal to acknowledge the risk of a recession.

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