Elon Musk Says Interest Hike by Fed Risks of Deflation

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  • On September 21st, 2022, the Federal Reserve Board will determine the next hike.
  • Economist Peter Schiff is sounding the alarm about imminent hyperinflation.

Elon Musk, CEO of Tesla and SpaceX, has issued a grave warning for the American economy. Musk claims that deflation will occur if the Federal Reserve raises interest rates significantly again. Musk’s warning comes as market watchers anticipate a massive interest rate rise from the Federal Reserve at the September FOMC meeting.

And Musk isn’t the first prominent individual to paint a bleak picture of the future of the US economy. Michael Burry, the founder of Scion Asset Management and a well-known investor, foretold a similar economic collapse to the 2008 crash.

Recession on the Cards?

But economist Peter Schiff is sounding the alarm about imminent hyperinflation. According to him, the Federal Reserve will swiftly switch to quantitative easing, leading to skyrocketing inflation.

For Elon Musk, if the Fed raises interest rates again, the result will be deflation. When the general level of prices drops, this is known as deflation. Deflation may result from a variety of sources, including increases in productivity and/or decreases in demand, or from a reduction in the money supply of a country.

As the money goes away, customers benefit from deflation. On the other hand, if this occurrence persists for a considerable amount of time, it might cause the economy to contract.

On September 21st, 2022, the Federal Reserve Board will determine whether or not to raise interest rates. The CME Fed Watch tool now indicates a 91% chance of a 75 basis point rise. Even Goldman Sachs revised its projection upward, from 50 bps to 75 bps. A significant factor in the decision will be the consumer price index data releasing on September 13th.

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