The US economy is headed for deflation and an unprecedented crisis!

Tesla and SpaceX CEO Elon Musk has issued a warning for the US economy. Musk warns that another big Federal Reserve hike could lead to deflation. Musk’s warning comes as the Fed is expected to make another massive interest rate hike at the September FOMC meeting.

Elon Musk is not the main figure presenting a pessimistic scenario for the US economy. Renowned investor and founder of Zion Asset Management, Michael Burry, predicted the 2008 financial crisis in the United States.

For his part, economist Peter Schiff warns Against hyperinflation. He thinks feeder It will soon turn to quantitative easing, which will cause runaway inflation in the economy.

Analysis of Elon Musk’s deflation warning

Elon Musk Hopefully another interest rate hike by the central bank will lead to deflation. Deflation is a decrease in the prices of goods and services. Deflation can be caused by many factors such as increased productivity, lower demand or a contraction in a country’s money supply.

According to Elon Musk, the current risk of deflation comes from a contraction of the money supply The central bank has committed to quality tightening to fight inflation flowing Central Bank Governor, Jerome Powell, has already promised to hurt homes and businesses. He also revealed that The central bank will try to increase the strength of the dollar to fight consumer inflation.

Deflation can be good news for consumers, as the same amount of money now has more purchasing power. However, if this phenomenon continues for a long period of time, it will lead to economic contraction and a deeper crisis in the economy.

The next Fed rate hike

The next interest rate hike Feeder Decided on September 21, 2022. Currently, the CME Fed Watch tool indicates a 91% probability of a 75 basis point hike. Goldman Sachs It also revised its forecast from a 50 basis point hike to a 75 basis point hike.

CPI data from September 13 will also have a major impact on the outcome.

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