Amidst the economic chaos in the U.S. banking landscape, Elon Musk, the CEO of Tesla and owner of Twitter, has unleashed his ire against the country’s central bank. Musk alleges that the U.S. Federal Reserve is working with “too much latency in their data,” and he demands that the central bank slash the federal funds rate “immediately.”
Musk’s Criticism of the Federal Reserve’s Data Delay; Study Shows 186 U.S. Banks Risking Financial Disaster
In the past week, three major U.S. banks have failed, First Republic Bank was salvaged, and Credit Suisse obtained 50 billion Swiss francs from the Swiss National Bank. Just last week, the U.S. Federal Reserve granted the banks $164.8 billion to strengthen their liquidity. Despite all the bailouts and the expectation of the central bank injecting up to $2 trillion in liquidity after the introduction of the Bank Term Funding Program (BTFP), the banking industry is still in the midst of danger. A recently published study shows that 186 U.S. banking entities face the same risks that caused Silicon Valley Bank’s collapse.
— Elon Musk (@elonmusk) March 17, 2023
On Twitter, Elon Musk, the CEO of Tesla, has been critical of the Federal Reserve, with his recent thoughts similar to the statements he made last December. At that time, Musk warned that if the central bank lifted the benchmark rate in December, the chance of a recession would be greatly increased. After the Fed raised the rate by 50 basis points, Musk repeated his opinion and said, “At the risk of being redundant, these Fed rate increases might 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 banking difficulties in the U.S. published by the Washington Post, Elon Musk responded to Graham’s tweet. “FDIC needs to change to unlimited coverage to stop bank runs and Treasury needs to stop issuing ridiculously high-yield bills, such that it makes no sense to have money in a low-interest-rate bank ‘savings’ account. Right now,” Musk tweeted. In another tweet concerning the few U.S. banks that have failed, Musk argued that the U.S. central bank is too slow with its data, stating:
The Fed is operating with too much latency in their data. Rates need to drop immediately.
Musk’s commentary about the Treasury bonds alludes to the long-maturity bills affected by the Fed’s fiscal tightening policy. The study about the 186 banks that are facing similar financial problems highlights the fact that 10- to 20-year and 20+ year Treasury bonds have lost roughly 25% to 30% of their market value. “Overall, as is evident, the Fed’s fiscal policy tightening caused significant value declines in long-duration assets,” the study explains.
Musk has consistently spoken out against the Fed’s swift rate-hike campaign. On January 13, 2023, Musk tweeted about the Fed and asked what would have happened in 2009 if the Fed had raised rates instead of lowering them. In a subsequent tweet, Musk added, “The higher the rates, the harder the fall.”
What are your thoughts on Elon Musk’s criticism of the U.S. Federal Reserve’s fiscal policy? Do you agree with his stance or do you have another opinion? Share your ideas in the comments section below.