Amid the chaos in the US banking sector, Elon Musk, CEO of Tesla and owner of Twitter, has criticized the country’s central bank. Musk insists that the US Federal Reserve operates with “way too much latency in its data”, and he insists that the central bank needs to lower the fed funds rate “immediately”.
Musk’s critique of Federal Reserve data latency; Study shows 186 US banks suffer from financial risk
Last week, three major US banks collapsed, First Republic Bank was bailed out and Credit Suisse received 50 billion Swiss francs from the Swiss National Bank. Just last week, the US Federal Reserve lent to banks $164.8 billion to consolidate liquidity. Despite all the bailouts and waiting for the central bank to inject up to $2 trillion in cash After the creation of the Bank Term Funding Program (BTFP), the banking sector is still not out of the woods. A recent post study shows that 186 American banking institutions suffer from the same risks that caused the failure of Silicon Valley Bank.
— Elon Musk (@elonmusk) March 17, 2023
On Twitter, Tesla CEO Elon Musk slammed the Federal Reserve, with his recent comment very similar to statements he made last December. At that time, Musk warned that if the central bank raised the benchmark rate in December, the risk of recession would be greatly amplified. After the Fed raised the rate by 50 basis points, Musk reiterated his position and said, “At the risk of being repetitive, these Fed rate hikes may go down in history as the most damaging of all. the temperature.” Last week, Musk again criticized the US central bank in a number of viral tweets.
After computer scientist and essayist Paul Graham shared an article about banking problems in the United States published by the Washington Post, Elon Musk replied at Graham’s tweet. “The FDIC needs to move to unlimited coverage to stop bank runs and the Treasury needs to stop issuing ridiculously high yielding bonds so it makes no sense to have money in a bank savings account at low interest rate. Right now,” Musk tweeted. In another tweet about the small handful of US bank meltdowns, Musk insisted that the US central bank is too slow with its data, saying:
The Fed operates with far too much latency in its data. Rates need to drop immediately.
Musk’s comment on Treasuries refers to long-dated Treasuries affected by the Fed’s monetary tightening policy. The study of 186 banks with similar financial problems highlights the fact that 10-20 year and 20+ year treasury bills lost around 25-30% of their market value. “Overall, as is evident, the tightening of monetary policy by the Fed caused a significant decline in the value of long-term assets,” the study explains.
Musk has continually denounced the Fed’s rapid 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 follow-up TweeterMusk added, “The higher the rates, the harder the fall.”
What do you think of Elon Musk’s criticism of the US Federal Reserve’s monetary policy? Do you agree with his position or do you have a different perspective? Share your thoughts in the comments section below.
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