Tesla Inc TSLA CEO Elon Musk said Monday the U.S. is probably in a recession— and added that it could get worse and last up to a year-and-a-half.
What Happened: The billionaire entrepreneur, who was speaking remotely at an All-In Summit being held in Miami, said recession could lead to misallocation of capital and warned companies should to ensure they have enough reserves.
“We probably are in a recession and that recession will get worse. These things pass and then there will be boom time again,” Musk said.
“It’ll probably be some tough-going for … a year, maybe 12-18 months is usually the amount of time for a correction to really happen."
The billionaire entrepreneur said recessions are not necessarily bad things and that it starts “raining money on fools” due to misallocation of budgets.
“If one is running a company that makes useful products, make sure you are not running things too close to the edge from a capital standpoint of view. Reserve some capital allocation that lasts through irrational times.”
Why It Matters: Goldman Sachs GS Chairman Lloyd Blankfein reportedly said on Monday the U.S. is under a "very, very high risk" of a recession.
Elevated inflation levels and subsequent Federal Reserve interest rate hikes have raised the probability of a recession coming by the end of 2023.
Earlier this month, the U.S. Fed raised interest rates by half a percentage point to a range of 0.75% to 1%. In March it had raised interest rates by a quarter-percentage point and cut its GDP estimate for 2022.
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