Elon Musk explains why he believes the recession will last for 18 months and that inflation has peaked
Elon Musk, the CEO of Tesla and SpaceX, spoke about the U.S. economy, inflation, and recession on Thursday at Tesla’s 2022 annual meeting of stockholders.
He responded to a query regarding inflation by saying, “We do get a good degree of insight into where prices of things are going over time because when you’re building millions of vehicles, you have to buy commodities months before you need them… We have some idea of where costs are going over time because of the lengthy supply chain and significant degree of inertia.
“The amazing thing that we’re seeing today is that most of our commodities, most of the stuff that go into a Tesla — not all, but more than half — the prices are heading down in six months, six months from now,” Musk explained. Added him:
The trend is down which suggests that we are past peak inflation.
Making macroeconomic predictions, however, is a recipe for disaster, according to Musk, who added: “My judgment is that we are passed peak inflation and that we will have a recession. I predict a reasonably modest recession, although this is just my opinion.
He stated that his opinion is “pure guesswork” and added:
Our guess is that it’s a mild recession for 18 months or something like that, would be my best guess right now.
“We don’t have basic capital misallocations in the United States like we did in the years before to 2008, when we were constructing primary housing units at a rate twice as fast as household formation, which plainly makes no sense,” he said. Many firms had excessive debt.
“I would say probably, you know, light, moderate recession, maybe 18 months-ish, and I think inflation is going to decline significantly,” Musk said in his closing statement. “The leverage or debt that firms have right now is quite modest. It’s my best estimate.
The comments made by the Tesla CEO during the shareholders meeting were similar to those he made on Twitter on July 28. At the time, he wrote: “Inflation may be moving lower… The trend for Tesla commodity prices is more downward than upward.
After admitting in March that both Tesla and Spacex experienced severe inflation pressure, Musk started speculating about the U.S. economy entering a recession a few months ago.
“I think there’s a good chance we’re in a recession, and it’ll definitely grow worse, but these things pass, and then there’ll be boom times again… It’ll definitely be difficult for, well, a year, maybe 12 to 18 months,” he said in May.
He said, “It has been showering money on fools for too long. A recession is actually a wonderful thing for the U.S. economy. Bankruptcies must occur occasionally.