Billionaire Elon Musk backed a prominent Wharton economist who accused the Federal Reserve and its chairman Jerome Powell of completely botching their response to the current economic slump.
Musk reacted to a fiery rant from Wharton professor Jeremy Siegel, who told CNBC’s “Halftime Report” on Friday that the Fed’s current policy path is “way too tight” and “makes absolutely no sense to me whatsoever.”
Siegel, who admitted he was “very upset” about the Fed’s handling of the situation, accused Powell and his colleagues of waiting far too long to hike interest rates. Now, Siegel argued, the Fed is tanking the economy by being too aggressive with rate hikes despite signs inflation is already easing.
“It’s like a pendulum. They were way too easy, as I’ve told you and many others, through 2020, 2021,” Siegel said. “And now, ‘Oh my God, we’re going to be real tough guys until we crush the economy.’ ‘Poor monetary policy’ would be an understatement.”
“Siegel is obviously correct,” Musk tweeted on Saturday in response to a clip of Siegel’s rant.
Siegel accused Powell of ignoring several economic indicators, including falling commodities prices, a slowdown in the US housing market and declines in money supply.
Musk is among many business leaders who have held a pessimistic view on the state of the US economy in recent months. In June, Musk teed up layoffs at Tesla while warning he had a “super bad feeling” about the economic outlook.
Earlier this month, Musk joined others in warning that the Fed risked causing “deflation,” or a damaging collapse in prices, by hiking rates too aggressively despite a slowing economy.
The stock market has plummeted deeper into bear territory since last week, when the Fed implemented a super-size interest rate hike for the third straight month. Central bank officials indicated that further sizable increases are likely in the months ahead — a sign the Fed is maintaining a hawkish course to combat decades-high inflation.
That’s despite warnings from Siegel, Musk and others that the Fed could steer the economy into a lengthy downturn. US GDP has already declined for two consecutive quarters — the widely held definition of a recession.
Last week, Powell reiterated that the Fed planned to raise its benchmark to a “restrictive level” and “keep it there for some time” until meaningful signs that inflation had receded.
Powell admitted the stance would likely result in job losses and a major correction in the US housing market.