With the U.S. banking sector in turmoil, Tesla CEO and Twitter owner Elon Musk has criticized the country’s central bank. Musk claims that the Federal Reserve is operating with “too much data lag” and that the central bank needs to cut the federal funds rate “immediately.”
Musk criticized the Federal Reserve’s data delays, and a survey found that 186 U.S. banks suffer from financial risk
Last week, three major U.S. banks failed, First Republic Bank was bailed out, and Credit Suisse received CHF 50 billion from the Swiss National Bank. Just last week, the U.S. Federal Reserve gave each bank aloan. 164.8 billionto shore up liquidity. Despite all the bailouts and the expectation that the central bank will inject up tothe $2 trillion in liquidityfollowing the creation of the Bank Term Funding Program (BTFP), the banking industry has yet to emerge from the crisis. According to a recently releasedstudy186 banking institutions in the U.S. are suffering from the same risks that caused the collapse of Silicon Valley Bank.
– Elon Musk (@elonmusk) is March 17, 2023
Tesla CEO Elon Musk has been critical of the Federal Reserve on Twitter, and his most recent comments are very similar to those he made last December. At the time, Musk had warned that the risk of a recession would be greatly amplified if the central bank raised its benchmark interest rate in December, and after the Fed raised rates by 50 basis points, Musk reiterated his position, saying, “Again, these Fed rate hikes are the most harmful in history. They may go down in history as the most damaging ever.” In the past week, Musk has again criticized the U.S. central bank in a number of viral tweets.
After computer scientist and essayist Paul Graham shared an article about the U.S. banking problems in the Washington Post, Elon Muskrepliedto Graham’s tweet:FDIC changes to unlimited compensation to stop bank runs needs to be done, and the Treasury needs to stop issuing outrageously high-yield bills that make it pointless to have money in low-interest bank “savings” accounts. Now,” Mask tweeted. In another tweet about a handful of U.S. bank failures, Musk argued that the U.S. central bank data was too slow, saying:
The Fed is operating with too much data lag. Interest rates need to be lowered immediately.
The Treasury bills mentioned in Musk’s commentary are long-term redemption bills affected by the Fed’s tight monetary policy. A study of 186 banks suffering from similar financial problems underscores the fact that 10- to 20-year and 20+ year Treasury notes have lost roughly 25% to 30% of their market value.” Overall, the study explains, “As is clear, the Fed’s monetary tightening has resulted in significant declines in the value of longer-term assets.
Musk has continually called for a swift Fed rate hike campaign; on January 13, 2023, hetweetedabout the Fed and asked what would have happened in 2009 if the Fed had raised rates instead of lowering them. In a follow-uptweet, Mask added, “The higher the rate, the harder it is to fall.”
What are your thoughts on Elon Musk’s criticism of the Federal Reserve’s monetary policy? Do you agree with his stance or do you have a different perspective? Share your insights in the comments section below.
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